Mar 15, 2016
Would Donald Trump’s tax plan help Canadians selling homes in Florida?
How will Trump’s tax plan impact Canadians selling real estate in Florida?
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For the millions of Canadians visiting Florida this year, avoiding the topic of Donald Trump is nearly impossible. Along with Trump dominating the election news cycle, the Republican front-runner often makes campaign pit stops at his Mar-a-Lago Club in Palm Beach.
Trump’s tax reform plan calls for tax cuts across the board, including the capital gains tax. A lower American capital gains tax might seem like an intriguing proposition to Canadians considering selling property in Florida. But Trump’s tax reform proposal may be overshadowed by a property owner’s Canadian tax bill.
Fifty per cent of your capital gains are taxed at your individual tax rate in Canada. And there’s speculation a higher percentage may be introduced during the upcoming federal budget. Additionally, the extra Canadian dollars generated from converting higher-valued American dollars back into Canadian currency is also part of your capital gains. So even if there's some Canadian tax relief by way of a credit for U.S. tax paid, the final combined bill may reduce the temptation to sell.
“It’s just as important to be focusing on the tax implications here in Canada, if not more so,” said Jamie Golombek, managing director of tax and estate planning at CIBC Wealth Advisory Services.
More than 500,000 Canadians own property in Florida, according to BMO Financial Group. While there’s limited evidence real estate owners are eager to sell, the loonie’s slide has reduced the amount of new buying activity. According to the National Association of Realtors, Canadians made up 11 per cent of foreign buyers in the Sunshine State last year, down dramatically from an average of 37 per cent over the previous six years.
Meanwhile, much has been said about Trump’s plan to dump the so-called “death tax” on property inherited after a person’s death. Trump’s website says the tax “punishes families for achieving the American dream.” According to CIBC, death taxes only apply to estates exceeding US$5.43 million in value, which translates into more than $7 million north of the border – which Golombek suggests is likely higher than the average net worth of Canadians who own property in Florida.
