Thinking of Selling Your U.S. Home? Consider These 4 Questions First

Thinking of Selling Your U.S. Home? Consider These 4 Questions First

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Over the last few years, the economy has been in flux, as higher interest rates, a low Canadian dollar and an increasing cost of living has affected the budget of Canadians living on both sides of the border.

Given these factors, if you own U.S. real estate, you may be thinking of selling your home. Before you put it on the market, it’s worth asking yourself a few questions first to see if now is the right time for you to sell.

1. How much equity do you have in your home?

In some markets, the value of U.S. real estate rose sharply in value during the pandemic … and it hasn’t really come down. While prices may have leveled off, depending on where your property is, you may have built up significant equity in your home. “Canadians should understand the value of their U.S. home as a way of leveraging some of their equity,” says Alain Forget, VP, Head of Sales and Business Development at RBC Bank.

While selling your U.S. home might be a lucrative move, pulling the equity out with a Home Equity Line of Credit would provide you liquidity in U.S. funds. “That’s liquidity without the 35-37% exchange rate available to you,” says Forget.

2. What shape is your home in?

Does your home need any upgrades? The real estate markets in some U.S. hot spots can be very competitive, and your home may need to be move-in ready in order to sell for the price you’re looking for.

“Many Canadian property owners are realizing their homes need upgrades,” says Forget. If you’re considering selling, consider the fact that you may need to spend some time and money on repairs and updates before you put your home on the market.

3. Can you refinance?

“Many Canadians have built up equity over time in their U.S. property,” says Forget. “Especially if they purchased 12 years ago when the Canadian dollar and U.S. dollar were at par. This is a timely opportunity to consider refinancing.”

One suggestion Forget says is to refinance in order to lock in a rate for a term of three to ten years as a cash-out mortgage. Then you can use the funds to renovate or cover U.S. bills and expenses. “It’s very beneficial to have U.S. cash on hand without the concern for fluctuating foreign exchange costs,” says Forget.

4. Are you aware of your U.S. tax1 obligations?

In the U.S., like in Canada, if you sell your home for more than you paid for it, you’re required to pay tax on the difference, minus some expenses — known as capital gains tax.

And even as a Canadian resident, your tax obligation falls to the U.S. government first.

If you have owned your property for at least a year, you will be subject to long-term capital gains tax at one of the following rates (as of 2024):

  • 0% if you’re a single taxpayer with a taxable income of less than $47,025

  • 15% if you’re a single filer with taxable income less than $518,900

  • 20% if you’re a single filer with a taxable income of more than $518,900

  • Capital gains are taxed like ordinary income earned in the U.S. if you owned your property for less than a year.

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Thinking About Selling Your U.S. Property?

Whether you’re still working and need a better savings strategy or you’re retired and want to fine-tune an existing plan, take a step in the right direction today.

Learn more

1 Consult your financial, tax, legal, and other professional advisors prior to applying for a U.S. mortgage.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

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