How much US estate tax could a Canadian owe on a Florida condo?

Why the exemption for a Canadian owner is so much smaller than an American's

US estate tax applies to a non-resident alien's US-situs assets, which includes US real estate, tangible property located in the US, and stock of US corporations. Without any treaty relief, the exemption available before that tax applies is only US$60,000, a figure that has not moved in decades and is a small fraction of the multi-million-dollar exemption available to a US citizen or domiciliary. On paper, that means a mortgage-free Florida condo worth a few hundred thousand dollars could face US estate tax on almost its entire value. This is the same US-situs concept behind the taxation of a US vacation home more generally, and it applies whether or not the property was ever rented out.

Whenever the value of a non-resident's US-situs assets exceeds that US$60,000 threshold at death, the estate has to file Form 706-NA, regardless of how the tax works out once the treaty credit is applied. This filing obligation exists independently of whether any tax is actually owed.

How the treaty credit changes the math

Article XXIX-B of the Canada-US tax treaty gives a Canadian resident's estate access to a much larger, prorated version of the US exemption. The credit is calculated as the exemption available to a US citizen dying in the same year, multiplied by the ratio of the value of the decedent's US-situs assets to the value of their entire worldwide estate. In practice, this means a Canadian with a modest US property and a much larger worldwide estate ends up with a prorated exemption far above the bare US$60,000, often enough to wipe out the tax entirely.

As at the time of writing, the exemption available to a US citizen has been legislated at different levels in different years, including a further increase reported to take effect around 2026, so the specific dollar figure to use in a real calculation needs to be confirmed for the year of death rather than assumed from an older article or a prior year's return.

A worked example of the proration, using illustrative numbers

Say a Canadian dies owning a Florida condo worth US$800,000 and a worldwide estate, including that condo, worth US$4,000,000. The ratio of US-situs assets to worldwide assets is 20 percent. If the exemption available to a US citizen that year were, hypothetically, US$13,000,000, the estate's prorated credit-equivalent exemption would be 20 percent of that figure, or US$2,600,000. Because that prorated exemption is well above the US$800,000 condo value, no US estate tax would actually be payable, even though Form 706-NA still has to be filed to establish the numbers and claim the credit. Change the inputs and the answer changes: a smaller worldwide estate, a larger US property, or a lower exemption in the year of death can all push real tax into the picture.

The marital credit and why joint ownership is not automatically safe

The treaty also allows an additional marital credit where US-situs assets pass to a surviving spouse who is not a US citizen, which can further reduce or eliminate the tax when the right conditions and elections are in place. Joint ownership itself is not a shortcut around any of this: for a non-resident alien, US estate tax rules generally include the full value of jointly held property in the estate of the first spouse to die, unless the surviving spouse can document their own financial contribution toward buying the property. Couples who assume a joint title automatically splits the value 50/50, the way it typically works for US citizen spouses, are often surprised by this rule.

Planning moves that actually reduce the exposure

A non-recourse mortgage secured only by the property itself, with no personal liability to the borrower, reduces the value counted in the US estate to the equity in the property rather than its gross value, because the debt is deducted in full against that specific asset. Ordinary recourse debt does not get the same full deduction for a non-resident estate. Life insurance is another common tool: a policy sized to the expected tax exposure after the treaty credit gives the estate liquidity to pay US estate tax without forcing a sale of the property, which is the same planning question that comes up for a Canadian holding a portfolio of US stocks rather than real estate. Both of these are decisions to make while you are alive and healthy, not options available after the fact.

There is a Canadian side to this too. Death is a deemed disposition of capital property under Canadian tax law, so the same condo can generate a Canadian capital gain in the year of death at the same time as any US estate tax exposure is being worked out. The treaty includes mechanisms intended to prevent the two countries from taxing the same value twice, but coordinating a US estate tax filing with a Canadian terminal return is not something to leave until the executor is already deep into the administration. Getting both returns in front of the same advisor early is what actually makes the relief work in practice.

How we handle US estate tax exposure for clients

We model the proration using a client's actual worldwide asset picture rather than assuming the exposure is either negligible or catastrophic, because the answer depends entirely on the ratio between the US property and everything else the client owns. Where the numbers show real exposure, we look at non-recourse financing, insurance and ownership structure together rather than picking one tool in isolation. Our snowbird property tax guide covers this alongside the day-count and filing rules that go with owning US property part-time.

Source: IRS — Instructions for Form 706-NA.