There have been many wonderful opportunities for Canadians to buy homes in Arizona. Over the past 10 years, and especially during those times when the Canadian dollar strengthened against the US dollar, it has been my pleasure to assist a number of Canadian buyers find second homes in Scottsdale and Phoenix.
To view the past 10 years of exchange rate history between Canada and the US, expressed in Canadian Dollars, click the link below.
Because the Valley of the Sun is such a diverse assortment of communities, there is usually a housing option available that will suit all budgets and location preferences. Most Canadian buyers want a low maintenance lifestyle (since they are typically only here for months at a time) and that has made condos, town homes and patio homes very popular options. Most Condo complexes and patio home and town home communities have Home Owner Association fees that cover common area maintenance and this often includes front yard maintenance as well.
The key thing that Canadian buyers need to be knowledgeable of in purchasing property in Arizona are the tax laws that govern transactions. The good news is that there is no sales tax on the original purchase. There is property tax that is paid twice yearly (in April and October) and it is typically collected and paid by the lender (if a loan is involved in the purchase). Many Canadian purchases are all cash (entirely at the buyer’s discretion) so a bill for the property taxes must be paid as due. Property taxes are generally considered to be very reasonable in Arizona and they vary by community. If you call me with a particular city I can give you a very good idea of what to expect.
As an FYI, if a loan is to be secured, US lenders generally are looking for a 35% down payment as a minimum. I can put you in touch with some very good lenders who are quite familiar with the issuance of loans to Canadian buyers.
The tax that must be understood by foreign buyers is encountered on the back end, when it’s time to sell your home. FIRPTA or the Foreign Investment in Real Property Tax Act imposes tax rules on the sale of real estate assets. This is the government’s way of assuring that they are paid a portion of your capital gain upon sale. To be subject to these tax rules, the property must sell for more than $300,000. If the sale price is less than $300,000 then no tax is due. The following example is basic information. You should always speak with a tax expert or CPA about your specific situation.
So let’s take a look at an eligible property. Let’s say you bought a property 10 years ago for $200,000 and you are selling now for $350,000. This sale is subject to FIRPTA regulations. If you made improvements to the property, then those expenditures will raise the cost basis, but to keep it simple we’ll just say you are selling the home and making a $150,000 profit. This is considered a long term capital gain and is currently subject to a 15% tax rate. The government wants to make sure they get paid before you skedaddle back to Canada with all your loot so they actually reduce your proceeds (at closing) from the buyer by an amount equal to 10% of your sale price, in this case $35,000.
The title company handling your closing is required by law to send this amount to the IRS. At this point you will need to send in a return showing your actual profit and claim a refund. In this example your actual tax would be 15% of your $150,000 profit or $22,500 so you would be entitled to a refund of $12,500. This will take 90 to 120 days to be paid out.
The following link, courtesy of First American Title, will give you more information Foreign Buyers Guide.
Feel free to use this site to search for homes anywhere in the Phoenix and Scottsdale metropolitan area. The search box in the upper right corner can be expanded by clicking on the Advanced Home Search Option. You may also click on the “What’s New?” link directly above this article and scroll through the “What’s New” articles that are listed.
For more information on Homes For Sale In Phoenix or Scottsdale or to coordinate searching with professional representation, feel free to contact me at 602-579-3393. I was born and raised in the Scottsdale and Phoenix area and would be delighted to assist you in discovering if your perfect next home might be located here.
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