Buying a Second Home in Miami for Canadians
It’s the same every year, thousands of snowbirds flee the harsh Canadian winter to come under the warm Florida sun. Many of them have second homes there, particularly in Fort Lauderdale or Miami. Whether retiree or investor, Canadians like to invest in Florida real estate because the potential is financially attractive,in both the short and long term. Why such an interest ? What is the procedure ? What are the tax consequences? We tell you everything (what we know).
Why are Canadians buying a second home in Florida?
It’s a fact: Canada is the number one source of foreign tourism to Florida and the number one foreign property buyer. Florida welcomes approximately 3.8 million Canadians each year, and today, it is estimated that there are about 150,000, sometimes less, of Quebecers and French Canadians who reside year-round in southeast Florida. In 2018, 39% of all real estate acquisitions made by foreigners in this state were made by Canadians. Even if the Canadian dollar is not as strong as it was 10 years ago and even if the time of presence has shortened to ⅔ months in general, Canadians remain very attached to having a second home in the SouthEast of Florida.
The process of buying a second home in Florida
One could logically think that the purchase of real estate is done by bank financing. Well, not at all. A survey by the Florida Realtors association found that 90% of Canadians who own real estate in Florida bought it in cash, without taking out a mortgage. In this case, it is true that the procedure is simplified. Otherwise, you must have your credit pre-approved by a bank in Florida (or Canada), providing proof of your bank credibility and your income for the past two years, as well as proof of your existing assets.
In general, you must first find a real estate broker: no need to choose several, all the properties for sale are listed on a database called MLS, which all real estate agents have access to. Then you will need to contact an inspection company, an accountant and, if you wish to rent your property when you return to Canada, a property manager.
The consequences of buying a second home
In matters of taxes, the purchase of a second home is not without consequences for a Canadian. Indeed, since the house is not his main residence, he remains a Canadian resident for tax purposes. Be careful, however, not to become a presumed resident, staying on Florida soil more than 183 days per year (to see the method of calculating this rule and its temperaments, consult a lawyer or a chartered accountant).
If you decide to rent out your property when you are not there, be aware that you can choose to be taxed on the net amount of rental income. This income is also taxable in Canada and in your province of residence. In addition, tax paid in the United States entitles you to a foreign tax credit on your Canadian and provincial returns.
If you decide to resell the property, you will be subject to a deduction of 15% of the sale price (unless the amount of the transaction is less than $ 300,000. For any question on the terms of this taxation, consult a professional).