Canadian Tax on Foreign Property in 2026: The T1135 Reporting Rule and the Snowbird Trap

Published on: July 6, 2026

Please note: This article is general information, not tax, legal, or accounting advice. Cross-border tax is complex, and Canadian and US rules, thresholds, and treaty positions change. Figures are current as of mid-2026. Consult a qualified cross-border tax professional before acting.

Quick answer: As a Canadian resident you are taxed on your worldwide income, so foreign rental income and gains are reportable. You must also file Form T1135 if your specified foreign property cost more than CAD $100,000 at any point in the year, though a purely personal-use vacation home is exempt. And when you sell US property, FIRPTA lets the buyer withhold 15% of the gross sale price, not the profit, and send it to the IRS. Here is how each piece works.

The starting point: Canada taxes worldwide income

Canadian tax residents are taxed on income from all sources, wherever earned. That means if you own a rental condo in Florida, an apartment in Lisbon, or a villa in Mexico, the net rental income is taxable in Canada, and so is any capital gain when you sell (reported on Schedule 3 of your T1 return). Foreign tax you pay is usually credited against your Canadian bill through the foreign tax credit, so you rarely pay twice, but you do have to report.

Many Canadians who buy abroad already understand the income side. Where they get caught is the reporting side, which is where Form T1135 comes in. If you are still deciding where to buy, see our overview of where Canadians buy property abroad.

Form T1135: the foreign property reporting rule

Form T1135, the Foreign Income Verification Statement, is a disclosure form, not a tax. But it is one of the most heavily penalised forms in the Canadian system, so it deserves attention.

When you must file. You must file T1135 if the total cost of your specified foreign property exceeded CAD $100,000 at any time during the year. Two details trip people up:

• It is based on cost (historical purchase price), not current market value. A property that cost $95,000 but is now worth $200,000 does not, on its own, trigger the form.
• The $100,000 is tested against your total specified foreign property, aggregated. Foreign real estate held for investment, foreign stocks, foreign bank accounts, foreign bonds, and interests in foreign entities all count together. It is not a per-property threshold.

Two tiers of reporting. If your total foreign property cost is between $100,000 and $250,000, you can use the simplified method (Part A), check a box for each property type and list your top countries. At $250,000 or more, the detailed method (Part B) requires property-by-property information.

What counts as specified foreign property: foreign real estate held to earn income, shares of foreign corporations (including US stocks, even when held in a Canadian brokerage account), foreign bank and investment accounts, foreign bonds and debts owed by non-residents, and interests in foreign trusts.

What is exempt: property held inside registered plans (RRSP, RRIF, TFSA, RESP), Canadian mutual funds that hold foreign investments, personal-use items like art and jewellery, and, critically for snowbirds, personal-use real estate (more on that below).

For the full mechanics of when foreign property must be declared, see do you have to declare foreign property?

The snowbird trap: personal use vs rental

Here is the single most important nuance, and the reason so many snowbirds get it wrong.

A foreign vacation home used mainly for your own personal enjoyment is exempt from T1135, even if it cost far more than $100,000. The CRA treats it as personal-use property, like a cottage.

But the moment you rent it out to earn income, it becomes specified foreign property, and if its cost is over $100,000, it now has to be reported on T1135, on top of declaring the rental income on your return.

So the Arizona condo you use every winter and never rent is generally outside the form. The same condo, listed on Airbnb whenever you are back in Canada, is inside it. Many part-year snowbirds cross this line without realising it, purely because they wanted to offset carrying costs with a few weeks of rental income. If you rent at all, assume the property is reportable and confirm with a cross-border accountant.

Why it matters, the penalties. Late filing carries a penalty of $25 per day (minimum $100, up to $2,500), and where the CRA finds gross negligence, penalties can climb to $500 per month (up to $12,000). Failing to report foreign income and file T1135 also extends the CRA's reassessment window by an additional three years. The Voluntary Disclosures Program can reduce penalties if you come forward before the CRA contacts you.

Selling US property: the 15% FIRPTA withholding

When a Canadian sells US real estate, a separate US law kicks in: the Foreign Investment in Real Property Tax Act (FIRPTA). It surprises almost every Canadian seller, usually at the closing table.

How it works. The buyer (or their settlement agent) must withhold 15% of the gross sale price, not the gain, not the net proceeds, the entire sale price, and remit it to the IRS within 20 days of closing. On a US$600,000 Florida condo, that is US$90,000 held back, even if your actual gain and tax are far smaller. FIRPTA applies even if you sold at a loss.

The reduced-rate and exemption tiers (based on the buyer's intended use):

• Sale price US$300,000 or less plus the buyer (or their family) will use it as a residence at least half the time for the first two years: 0% withholding (the buyer must sign a residency affidavit; if they will not, 15% applies).
• US$300,001 to US$1,000,000 with that same residence intent: 10% withholding.
• Over US$1,000,000, or any non-residence use, or vacant land: the full 15%.
• A corporate buyer gets no residence exemption.

It is a deposit, not your final tax. After closing you file a US non-resident return (Form 1040-NR), report the actual gain, and claim the withholding as a credit. The IRS refunds the excess, though the wait is typically 6 to 12 months. You will need a US ITIN (Form W-7) to do this. To avoid over-withholding in the first place, you can apply for a withholding certificate (Form 8288-B) before closing, which reduces the withholding to the tax actually owed on the gain, but you have to start this before the sale completes, which is why finding out about FIRPTA early is so valuable.

Two traps Canadians miss: the Canada-US treaty's real-estate carve-out means there is no treaty exemption on US property gains (the US keeps the right to tax them); and holding the property through a Canadian corporation does not avoid FIRPTA, because a foreign corporation is itself a "foreign person." You still report the sale to the CRA and use the foreign tax credit (Form T2209) to offset the US tax against your Canadian gain, which is where the treaty actually prevents double taxation.

The bigger picture: US reporting does not stop at FIRPTA

If you spend significant time in the US or hold US assets, FIRPTA is only one piece. The US has its own reporting regime, FBAR, Form 8938, and related filings, that can apply to cross-border individuals. Our companion guide on FATCA, FBAR, and Form 8938 covers the US side, and capital gains tax on overseas property covers the Canadian gain calculation in more detail.

Frequently asked questions

Do I have to report my Florida vacation home to the CRA?
If you use it mainly for personal enjoyment and never rent it out, it is generally exempt from Form T1135 as personal-use property. If you rent it out to earn income and it cost more than CAD $100,000, it becomes reportable.

Is T1135 based on what I paid or what the property is worth now?
On what you paid, the cost amount, not fair market value. The $100,000 threshold is measured against the aggregate cost of all your specified foreign property.

How much does FIRPTA withhold when I sell my US condo?
Generally 15% of the gross sale price. It can drop to 10% or 0% if the buyer will use the property as a residence and the price is under certain thresholds, but it applies to the full sale price, not your profit.

Can I get the FIRPTA money back?
Yes. FIRPTA is a withholding deposit, not your final tax. You file a US return (Form 1040-NR) to report the actual gain and reclaim the excess, or apply for a withholding certificate before closing to reduce it up front. You will need a US ITIN.

Does owning US property through a Canadian company avoid FIRPTA?
No. A Canadian corporation is a foreign person for FIRPTA purposes, so the withholding still applies, and it can add US estate-tax exposure. Get cross-border structuring advice before you buy.

Related reading on JanusHermes: where Canadians buy property abroad, FATCA, FBAR and Form 8938 for Americans, and do you have to declare foreign property?

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This article is for general information only and does not constitute legal, tax, or accounting advice. Canadian and US tax rules, thresholds, and treaty positions change; consult a qualified cross-border tax professional before acting.

A note on the numbers: where no source is named, the market figures in this article (prices, yields, costs) are indicative estimates compiled from publicly available market data and industry reporting at the time of writing. Markets move and rules change, so treat them as a starting point and verify current figures with official sources before acting on them.