U.S. Citizen Owning Rental Property in Ontario: Key Rules

Buying a rental property in Ontario while holding U.S. citizenship raises questions at three stages: whether you are allowed to buy, what extra tax applies when you do, and what you owe each year once tenants are paying rent. The answers depend heavily on your immigration status and on the type of property.

This article walks through the main rules in plain language. It is general information, not advice on your situation. Because the rules turn on facts such as residency, the number of units and how title is held, it is worth confirming your position with a lawyer and an accountant before you commit to a purchase.

The federal ban on foreign buyers

The federal Prohibition on the Purchase of Residential Property by Non-Canadians Act came into force on January 1, 2023. Section 4(1) bars a non-Canadian from buying residential property, directly or indirectly, subject to exceptions in s. 4(2) to (4).

Residential property here means a detached house or similar building with no more than three dwelling units, or a unit in a semi-detached, rowhouse or condominium-type building. A larger apartment building is outside that definition, but whether a particular property fits depends on its details.

Someone who breaks the ban, or knowingly helps another person do so, faces a summary-conviction fine of up to $10,000, and a superior court may order the property sold on the Minister's application after a conviction. A breach does not affect the validity of the sale itself.

Finance Canada announced in February 2024 that the ban would be extended from January 1, 2025 to January 1, 2027. Its status beyond that date should be checked before you buy. The exceptions and the exact meaning of non-Canadian depend on your own status, so it is worth confirming how they apply to you with a lawyer.

Ontario's non-resident speculation tax

Ontario's non-resident speculation tax (NRST) is 25%, effective October 25, 2022. It applies to the full consideration if any transferee is a foreign entity or taxable trustee, and each transferee is liable. It does not apply to land with multi-residential rental apartment buildings of more than six units.

There are exemptions, including transferees who are nominees under the Ontario Immigrant Nominee Program, protected persons, and spouses of Canadian citizens, permanent residents, nominees or protected persons. A rebate is available if the transferee becomes a permanent resident within four years of registration.

Because each transferee is liable, buying with a co-owner does not shield you from the tax if you are the one who counts as a foreign entity. Ask a lawyer to review the transfer before closing.

Tax on the rent you collect

A payer or agent, such as a property manager, must withhold 25% of gross rent paid to a non-resident landlord. The tax must be remitted to the CRA by the 15th day of the month after the rent is paid or credited, and an NR4 return with slips must be filed. Tenants paying rent for their own residence need not withhold.

You can elect under section 216 to be taxed on net rental income instead. To have tax withheld on net rent, the landlord and agent file Form NR6 with the CRA, ideally by January 1 or before the first rent payment. The general limit for the section 216 return is two years from the end of the year the income was paid, and a return is required even if no tax is payable.

If you do not elect, the 25% withholding on gross rent is generally your final Canadian tax on that income and you need not file a return. A late return after an approved NR6 makes the election invalid, and 25% can then be assessed on gross rent. How Canadian tax interacts with your U.S. return is a question for a cross-border accountant.

GST/HST and building your own rental

Long-term residential rent is generally exempt from GST/HST. A rental of a residential unit to an individual as a place of residence is exempt if continuous occupancy is one month or more to the same individual. As a result, registrants generally cannot claim input tax credits on GST/HST paid to acquire property and services used to make those exempt rentals.

If you build a rental yourself, the Excise Tax Act can treat you as having sold and bought the unit when you lease it for residential occupancy, with tax calculated on fair market value. A new residential rental property rebate may recover part of that tax, and the application is generally due within two years after the end of the month the self-supply occurred or tax first became payable. Purpose-built rental housing can fall under a separate rebate for construction beginning after September 13, 2023 and before 2031. These rules are technical, so involve an accountant early.

Your duties as a landlord from abroad

Being outside Canada does not change what the Residential Tenancies Act requires of you. These are some of the common obligations:

• Rent can generally be raised only if at least 12 months have passed since the tenant moved in or the last increase, with at least 90 days' written notice on Form N1, N2 or N3.
• The guideline is 2.1% for 2026 and 1.9% for 2027; new buildings, additions to existing buildings and most new basement apartments first occupied for residential use after November 15, 2018 are among those exempt from it.
• You may collect only a rent deposit of up to one month's rent for monthly tenancies, applied only to the last rental period, never to damage, and you must pay interest each year at the guideline rate.
• Entry for repairs, inspections or showing the unit to a buyer, lender or insurer needs at least 24 hours' written notice stating the reason, date and a time between 8 a.m. and 8 p.m..
• You cannot shut off or interfere with heat (September 1 to June 15), electricity, fuel, or water.

Breaking these rules can be an offence. Charging a fee the Act does not allow, misusing a rent deposit or not paying annual interest carries maximum fines of $100,000 for an individual and $500,000 for a corporation. A tenant can also apply to the Landlord and Tenant Board over illegal entry or unfixed repairs. If you hire a local property manager, how responsibility is shared depends on your arrangement, so it is worth confirming with a lawyer.

What to do next

• Confirm your citizenship, residency and immigration status in writing, since each rule above turns on it.
• Check the current status of the federal foreign buyer ban and its exceptions before making an offer.
• Count the units and confirm how the property would be classified for the ban and for the NRST.
• Decide how title will be held and who will be a transferee.
• Speak with a cross-border accountant about withholding, the NR6 election and your U.S. reporting.
• Arrange a property manager or local contact, and learn the notice and deposit rules before the first tenant moves in.

Frequently asked questions