The U.S. Real Estate Playbook for Canadians Pt 2: The U.S. Tax Trap

Get my Free Guide: Entity Setup Playbook for Canadians in the U.S. at https://www.investingintheus.com

Canadian investors keep getting wrecked in the U.S. by one avoidable mistake—and I’m seeing it over and over. I’m back on the podcast to lay it out plainly: if you use a U.S. LLC as a Canadian, the IRS treats it as flow-through, but the CRA treats it like a corporation. That mismatch can trigger double taxation and, in extreme cases, push your effective tax over 90%. I’ve had countless messages from Canadians trying to unwind this after the fact—I don’t want that to be you.

There’s a second landmine: FIRPTA withholdings. If you’re classified as foreign when you sell, the IRS can hold 15% of the gross sale price—not your net—tying up your cash for a year or more. Try flipping at scale like that and you’re out of business on cash flow alone.

Here’s how I structure it. I use a Limited Partnership (LP) with a U.S. corporate General Partner (GP). The LP keeps taxation flow-through so the CRA and IRS align (no double tax), and the U.S. GP helps avoid being treated as foreign for FIRPTA purposes, so withholdings hit the return properly instead of your gross sale proceeds. It’s not the only way, but it’s the cleanest, most common path I’ve seen work for Canadians.

I’m grateful to everyone who stuck with the show while I was away—your messages meant a lot. If you want the step-by-step, I put everything I wish I’d known into a free Entity Setup Playbook for Canadians investing in the U.S. Grab it at investingintheus.com, take it to your accountant/lawyer, and use it to get set up right. Next episode, I’m debunking the biggest myths that keep Canadians out of the U.S. market. Stay tuned.

E190 US Miniseries Pt 2

0:00 – Intro & Why I’m Back

0:36 – The #1 Mistake Canadians Make

1:52 – Why Everyone Pushes LLCs

4:35 – CRA vs. IRS Mismatch Explained

6:56 – How Double Taxation Happens

8:09 – The FIRPTA Withholding Trap

11:33 – The Structure That Actually Works

12:32 – LP/GP Setup Explained

15:23 – Tax Flow & Credits

17:28 – Other Structures & Nuance

18:47 – What’s Coming Next

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Andrew Hines is a seasoned real estate investor, business-builder, educator, and podcast host, well-recognized for his extensive experience in the field. Andrew graduated with an HBA from the Richard Ivey School of Business in 2008 and spent three years teaching introductory business at Western University as a Lecturer. He has been investing in real estate since 2011 and completing value-add projects since 2015, primarily in the luxury student rental space. Andrew started a project management company for building out new-construction townhomes in 2016 and has since built over 50 residential units throughout Southwestern Ontario. Andrew is an advocate for treating real estate investing like a business and uses his experience in his educational endeavors, coaching numerous investors on strategies to achieve financial independence and scale their portfolios effectively.

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