Schedule E
Supplemental Income and Loss
Who Must File
US tax residents who earn rental income, royalty income, or income from partnerships, S corporations, estates, or trusts, including income from Canadian rental properties.
Deadline
Filed with Form 1040 by April 15 (or extended deadline)
Penalty
No separate penalty; rental income is part of overall Form 1040 obligations
Step-by-Step Filing Instructions
Gather Canadian rental income and expense records for the tax year.
Convert all amounts to USD using the IRS annual average exchange rate.
Report gross rental income on Part I of Schedule E.
Deduct allowable expenses: mortgage interest, property taxes, insurance, repairs, management fees.
Calculate depreciation using US rules (27.5 years residential, straight-line).
Report net income or loss and carry to Form 1040.
Claim the Foreign Tax Credit on Form 1116 for Canadian tax paid on the same rental income.
Tips & Best Practices
US depreciation rules differ from Canadian CCA; you must use 27.5-year straight-line for US purposes.
Passive activity loss rules may limit your ability to deduct rental losses against other income.
Keep records in both CAD and USD for cross-referencing with your Canadian return.
Frequently Asked Questions
Do I report Canadian rental income on my US return?
Yes. US tax residents report worldwide income, including Canadian rental income. Report it on Schedule E converted to USD.
Can I deduct Canadian mortgage interest?
Yes. Mortgage interest on a rental property is deductible on Schedule E as an operating expense, converted to USD.
How do I avoid double tax on Canadian rental income?
File an NR6/T1159 in Canada and claim the Foreign Tax Credit on Form 1116 for Canadian taxes paid on the rental income.
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