The condo in Florida was supposed to be the simple part.
For Canadians owning U.S. property, estate tax is the part nobody mentions at closing. The realtor talks about the view, the lender talks about the rate, and the question of what happens to the property when you die tends to wait until your executors are the ones asking it.
Here is what most owners have never been told. A U.S. condo or winter home can sit inside the U.S. estate tax system even if you have never lived in the United States. The exemption available to a Canadian is calculated very differently from the one a U.S. citizen gets. And the relief that usually solves it comes from a treaty rather than from U.S. law itself.
None of that means owning U.S. property is a bad idea. It means the ownership structure matters, and the time to look at it is when you buy, not when the estate is being settled.
Table of Contents
Why your U.S. property is a U.S. situs asset
The United States taxes the estates of non-residents on their U.S. situs assets. Situs means location, and for estate tax purposes it is a technical concept rather than a common sense one.
U.S. real property is the clearest case there is. A condo, a house, a lot or a rental property located in the United States is U.S. situs, full stop, no matter where you live, where you bought it from or which currency you paid in. For most Canadians, the property is the single largest U.S. asset they will ever own.
It is rarely the only one. Other assets that generally count as U.S. situs:
Shares in U.S. corporations, including U.S. listed stocks and U.S. domiciled ETFs, regardless of where the shares are held or which brokerage holds them.
Tangible personal property physically located in the United States, such as the furniture, car and golf clubs that live at the winter home.
Certain U.S. retirement accounts and brokerage deposits.
Generally not counted:
U.S. bank deposits held in a personal account.
Certain U.S. Treasury obligations and certificates of deposit.
American Depositary Receipts of foreign corporations.
Canadian mutual funds and Canadian ETFs, even where they hold U.S. securities inside them.
That matters for property owners because the estate tax calculation looks at all of your U.S. situs assets together. The property is the starting point. The portfolio can quietly add to it, which we come back to below.
How the property is valued
The number that matters is the fair market value of the property at the date of death, in U.S. dollars. Not what you paid for it, and not what it was worth when you last thought about it. A condo bought for $400,000 fifteen years ago may well be a $900,000 asset in the estate return.
A mortgage can reduce that figure, but the type of mortgage matters. A non-recourse mortgage, where the lender can look only to the property itself, is generally deducted in full from the property’s value. An ordinary recourse mortgage, the kind most Canadian lenders offer, is generally only deductible in proportion to the share of your worldwide estate that is in the United States. For most people that means only a fraction of the debt counts.
Joint ownership is the other common surprise. Where spouses hold the property jointly, the U.S. rules can include the full value in the estate of the first spouse to die unless the survivor can show what they contributed to the purchase. Putting a spouse on title does not automatically halve the exposure.
The $60,000 number, and why it frightens people
Left to U.S. domestic law alone, a non-resident’s exemption from U.S. estate tax is $60,000 of U.S. situs assets. Not sixty thousand of taxable estate. Sixty thousand.
That number is what circulates in alarming headlines, and taken alone it would mean almost every Canadian with a modest winter home has an exposure.
It is also not the number that usually applies, because of the treaty. We have written about the size of that gap, and the treaty article that closes it, in The US Estate Tax Gap Between You and Your American Neighbour.
What the treaty does for Canadians owning U.S. property
Under the Canada U.S. tax treaty, a Canadian resident can access a prorated share of the same unified credit that a U.S. citizen gets.
For 2026, the U.S. estate tax exemption is $15,000,000, which corresponds to a unified credit of $5,945,800.
The Canadian’s available credit is calculated as:
U.S. situs assets divided by worldwide estate, multiplied by the full unified credit.
Here is how that works on an ordinary snowbird estate. Take a $1,000,000 Florida condo, no other U.S. assets, and a $5,000,000 worldwide estate. The property is one fifth of the estate, so the available credit is one fifth of $5,945,800, or $1,189,160. The tentative U.S. estate tax on a $1,000,000 estate is $345,800. The credit is larger than the tax, so nothing is owed.
That pattern holds more broadly than people expect. Because the rate schedule climbs as the estate grows, a Canadian whose worldwide estate is below the $15,000,000 exemption will generally find that the prorated credit covers the tax on their U.S. assets, whatever share of their wealth those assets represent.
There is also a marital credit available where property passes to a spouse, which can effectively double the relief, subject to limits.
The practical result for most Canadians owning U.S. property: with a normal estate and a normal winter home, the treaty relief usually eliminates the tax entirely.
Usually is not always, and eliminating the tax is not the same as eliminating the work.
Who still has a problem
The large estate. Once a worldwide estate is above the exemption, the prorated credit no longer keeps pace, and the rate schedule reaches 40%. A large estate with meaningful U.S. property can face real tax even after treaty relief, and the higher the U.S. share, the larger the bill. Remember that the worldwide figure includes everything: the Canadian home, registered accounts, a business, life insurance you own. Plenty of families are closer to that line than they think.
Everyone who does not file. The treaty credit is not automatic. It has to be claimed on a U.S. estate tax return. Anyone whose U.S. situs assets exceed $60,000 at death generally has to file Form 706-NA, whether or not any tax is payable, and an estate that never files has not claimed the relief that was supposed to make the tax disappear.
That filing requirement catches families by surprise constantly. The estate is not taxable, everyone assumes there is nothing to do, and a return that was due nine months after death never gets filed.
The part that hurts most: liquidity and timing
Even where the tax is manageable, the mechanics are not.
U.S. estate tax is generally due within nine months of death. Real estate does not sell on that timetable, particularly not in a distressed sale by executors in another country.
A property held in your own name will often need to go through probate in the state where it sits, separate from the Canadian estate, before it can be transferred or sold. That usually means a U.S. lawyer, local court filings and delay.
When the property is eventually sold, the buyer is generally required to withhold 15% of the gross sale price and remit it to the IRS because the seller is a foreign person, with some exceptions. The estate can recover what is not owed, but only after filing, which ties up more cash for longer.
So the family is dealing with a Canadian estate, a U.S. filing, state probate, a currency conversion and a property they may or may not want to keep, all at once, in the worst possible year.
This is the actual cost for most families. Not the tax. The scramble.
The Canadian side of the same property
U.S. estate tax is only half of the picture. At death, Canada generally treats you as having sold everything you own at fair market value, and that includes the Florida condo. Any growth in its value since you bought it is a capital gain on your final Canadian return, unless it passes to a spouse or a spousal trust.
The treaty helps here too. Where both countries tax the same property at death, U.S. estate tax paid can generally be claimed as a credit against the Canadian tax on U.S. source income, including that gain, within limits. The two systems can be made to fit together, but only if someone is looking at both of them.
The structures, and an honest word about them
There are ownership structures that change the analysis. Non-recourse debt against the property, certain trust arrangements, holding through a Canadian corporation, joint ownership arrangements, and life insurance to fund the liability rather than avoid it.
Each of them carries trade-offs and some carry Canadian tax consequences that are worse than the problem they solve. Holding U.S. real estate through a Canadian corporation, for instance, has historically created a shareholder benefit issue for personal use property, which is exactly the kind of unintended consequence that makes DIY structuring expensive.
Two honest points.
First, these decisions are much cheaper before you buy. Restructuring an existing property can trigger a disposition on both sides of the border.
Second, this is legal and tax territory, and it needs a cross border lawyer and accountant. Sartorial Wealth does not do either. What we do is size the exposure, model what happens to the estate’s liquidity, and make sure the investment side of the balance sheet is not quietly making it worse. Our Canada U.S. cross border estate planning guide covers how those pieces fit together.
The investment side, which is our department
For Canadians owning U.S. property, the portfolio is where the exposure most often grows without anyone noticing.
A Canadian who holds U.S. listed ETFs and individual U.S. stocks in a non registered account is holding U.S. situs assets. Add those to the property and the total U.S. estate grows. For a large estate, that means more assets exposed to tax at rates up to 40%. For every estate, it adds to the value on the filing and to the pile of assets executors have to deal with across the border.
The same market exposure held through Canadian listed funds is generally not U.S. situs.
So the estate position can often be improved without changing the investment strategy at all, simply by choosing the wrapper deliberately. There are trade-offs, including foreign withholding tax on dividends and product cost, so it is a genuine decision rather than an obvious one. But it is a decision, and most people have never been asked to make it.
Your checklist
Put a current value on the property in U.S. dollars. Not the purchase price. What it would sell for today.
Add up your other U.S. situs assets honestly. U.S. listed securities in taxable accounts, U.S. retirement accounts, the contents of the winter home. Most people underestimate this because they forget the portfolio.
Estimate your worldwide estate, because the treaty relief is a ratio and both numbers matter. If the total is anywhere near $15,000,000, the treaty will not do all the work.
Check how the property is held and how it is financed. Title, joint ownership and the type of mortgage all change the numbers.
Check the liquidity. If tax, probate costs and sale withholding all landed within a year, where would the cash come from without a forced sale?
Make sure your executors know that a U.S. return will probably be needed even if no tax is owed.
And if you are buying rather than already owning, get the structure advice first. It is the one moment when every option is still open. If you also spend winters at the property, the separate question of how many days you can spend in the U.S. is worth a look too.
Common questions
Do Canadians owning U.S. property have to pay U.S. estate tax?
They can. U.S. real property is a U.S. situs asset, and U.S. domestic law gives non-residents only a $60,000 exemption. The Canada U.S. treaty lets a Canadian claim a prorated share of the full U.S. unified credit, and for most people with a worldwide estate below the U.S. exemption that eliminates the tax. The estate generally still has to file.
Do I have to file if no tax is owed?
Generally yes. An estate with more than $60,000 of U.S. situs assets is generally required to file Form 706-NA, regardless of whether tax is payable, and the treaty credit is claimed on that return. It is usually due nine months after death.
Does a mortgage reduce U.S. estate tax on my U.S. property?
It can. A non-recourse mortgage is generally deducted in full from the property’s value. A regular recourse mortgage is generally only deductible in proportion to the U.S. share of your worldwide estate.
What if my spouse and I own the property jointly?
Joint ownership does not automatically split the value in half for U.S. estate tax purposes. The full value can be included in the estate of the first spouse to die unless the survivor can show their own contribution. The treaty marital credit may help where property passes to a spouse.
Will Canada tax the same property when I die?
Generally yes. Canada treats you as having sold the property at fair market value at death, which can create a capital gain on your final return unless it passes to a spouse. U.S. estate tax paid can generally be credited against that Canadian tax, within limits.
Should I put the U.S. property in a corporation?
Rarely, and not without advice. Holding personal use U.S. real estate through a Canadian corporation has historically created Canadian shareholder benefit problems. There are structures that work, and they need a cross border lawyer.
Sources
Internal Revenue Service, About Form 706-NA, United States Estate (and Generation-Skipping Transfer) Tax Return, Estate of nonresident not a citizen of the United States. https://www.irs.gov/forms-pubs/about-form-706-na
Internal Revenue Service, Some Nonresidents with U.S. Assets Must File Estate Tax Returns. https://www.irs.gov/businesses/small-businesses-self-employed/some-nonresidents-with-us-assets-must-file-estate-tax-returns
Internal Revenue Service, Estate Tax. https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax
Internal Revenue Service, FIRPTA Withholding. https://www.irs.gov/individuals/international-taxpayers/firpta-withholding
Convention Between Canada and the United States of America With Respect to Taxes on Income and on Capital, Article XXIX B. Department of Finance Canada. https://www.canada.ca/en/department-finance/programs/tax-policy/tax-treaties/country/united-states-america-convention-consolidated-1980-1983-1984-1995-1997.html
Disclaimer
Sartorial Wealth Inc. is a registered Portfolio Manager in Canada (ON, QC, AB, BC, NT, NS, SK, NB, NL) and an SEC-registered investment adviser. Content is for informational purposes only and does not constitute investment, legal, tax, or insurance advice. Investing involves risk; past performance is not indicative of future results. Services are only offered where properly registered. See full disclosures at https://sartorialwealth.com.
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