Can a U.S. Citizen Own a Rental Property in Ontario?

If you are a U.S. citizen thinking of buying a rental property in Ontario, three different layers of rules can matter: a federal ban on certain purchases, an Ontario tax on foreign buyers, and tax duties once rent starts coming in.

This article walks through each layer in plain terms. Your answer will depend on your status, the type and location of the property, and how you plan to hold it, so treat this as a map and not a final answer.

The federal ban on non-Canadians buying residential property

The Prohibition on the Purchase of Residential Property by Non-Canadians Act bars non-Canadians from buying residential property. The ban was extended to January 1, 2027. Because that date is close, confirm with Finance Canada or a lawyer whether it has been extended again before you rely on it.

The ban covers buildings with three homes or fewer and parts of buildings, such as a semi-detached house or a condominium unit. Property located outside Census Metropolitan Areas and Census Agglomerations is not covered.

There are exceptions in the regulations. They include certain work-permit holders (at least 183 days left on the permit and no earlier purchase), certain students, refugees and protected persons, accredited foreign mission members, and non-Canadian spouses or common-law partners buying with a Canadian citizen or permanent resident. Vacant land zoned residential or mixed use and purchases for development were also exempted by the 2023 amendments. The exact conditions matter, so have them checked against your facts.

Ontario's Non-Resident Speculation Tax

Separate from the federal ban, Ontario charges a Non-Resident Speculation Tax (NRST). The rate is 25%, effective October 25, 2022, on residential property anywhere in Ontario (land with one to six single-family residences) bought by a foreign national. A foreign national is an individual who is not a Canadian citizen or permanent resident, so this includes a U.S. citizen without Canadian status.

An exemption may be available where the buyer is a nominee, a protected person, or the spouse of a Canadian citizen or permanent resident. A rebate may be available if the buyer becomes a permanent resident within four years of registration.

• Check whether the federal ban applies to the property you want.
• Separately check whether the NRST applies to your purchase.
• Ask whether any exemption or rebate fits your status.

How you hold title with a partner or relative

If land is conveyed to two or more people (other than executors or trustees), they take as tenants in common unless the document shows an intention that they take as joint tenants. This applies even where one co-owner is the spouse of another. When a tenant in common dies, their share becomes part of their estate. When a joint tenant dies, the surviving co-owners inherit the deceased's share. If you are buying with someone, decide which you want before closing.

Tax on rental income once you own

The CRA encourages landlords to report rental income and expenses on Form T776, Statement of Real Estate Rentals, although it also accepts other financial statements. All rental properties have a December 31 year-end, so rental income is reported for the calendar year.

Current expenses, which are recurring costs with a short-term benefit, can usually be deducted in the year incurred. Capital expenses are generally recovered over time through capital cost allowance (CCA). Deductible items include interest on money borrowed to buy or improve the property, insurance premiums for the current year, and property taxes for the period the property was available for rent.

CCA can be claimed on the building but not on the land, and it cannot be used to create or increase a rental loss. Most buildings acquired after 1987 fall in Class 1, with a CCA rate of 4%.

If you rent short term, deductions (including CCA and interest) are denied from January 1, 2024 for a short-term rental that is not allowed at its location or does not meet provincial or municipal registration, licensing or permit rules. The denied portion is prorated by the number of non-compliant days. For 2024 only, a short-term rental that was compliant by December 31, 2024 is deemed compliant for the whole 2024 tax year. Local licensing rules vary by municipality.

Non-resident rules and next steps

If you live outside Canada, the payer or agent, such as a property manager, must withhold non-resident tax of 25% on the gross rent paid or credited to you for Canadian real property. The exception is residential tenants: the CRA does not expect residential renters to know their landlord's residency or to withhold 25% of rent. If you and your agent file Form NR6 and it is approved, 25% is withheld on net rent instead of gross, and until approval, withholding stays on the gross rent. You can file a separate Section 216 return that reports gross rent, taxes only the net rental income, and claims the tax already withheld. Our companion article on non-resident landlords covers this in more detail.

Long-term residential rentals of one month or more are exempt from GST/HST, and the landlord generally cannot claim input tax credits on related costs.

• Confirm your immigration status and whether the ban or the NRST applies.
• Check the property's location and type against the ban's coverage.
• Decide how title will be held if you are buying with others.
• Line up a property manager or agent who understands withholding.
• Speak with a real estate lawyer and a cross-border accountant before you sign.

Frequently asked questions