Should a Canadian buy US real estate personally, through a corporation, or through an LLC?

Why personal ownership is the starting point for most owners

A single US property, whether a rental or a vacation home, is usually held most simply in your own name or jointly with a spouse. Personal ownership lets you use the 871(d) election to be taxed on net rental profit, claim the Canada-US treaty's reduced FIRPTA and estate tax provisions where they apply, and report the property on your Canadian return using the same rules as any other capital property. There is no extra layer of corporate tax, no second return for an entity, and no risk of the mismatches described below.

The trade-off is liability: an individual owner is personally exposed if a tenant or a guest is injured on the property, which is why umbrella liability insurance, not a corporate structure, is usually the more practical answer for a single property. A properly sized liability policy costs far less than the ongoing compliance of a corporate structure and does not create any of the tax problems described next.

Joint ownership with a spouse can also help split the eventual rental income or capital gain between two people rather than concentrating it on one return, which matters where one spouse is in a materially higher tax bracket than the other. The split has to reflect a genuine contribution toward the purchase, not just a name added to the title for tax purposes, so it is worth documenting how the down payment and any mortgage payments were actually funded.

Why a US LLC is the option to avoid

A limited liability company is popular with American investors because the IRS lets it choose to be taxed as a pass-through, avoiding a separate corporate-level tax. The CRA does not follow that choice: it treats a US LLC as a corporation for Canadian tax purposes no matter how the IRS treats it. The result is a mismatch. The IRS taxes the Canadian member directly on the LLC's income as it is earned. The CRA, treating the LLC as a foreign corporation, does not tax the member until the LLC pays out a dividend, and by the time it does, the US tax paid years earlier often falls outside the window where a matching Canadian foreign tax credit can still be claimed. Our LLC guide and how the CRA taxes LLC income go through this mismatch and the limited relief available under the treaty in more detail.

Why a Canadian corporation is not a simple fix either

Routing the purchase through a Canadian corporation avoids the LLC mismatch, but introduces different costs. Rental profit earned by a Canadian corporation through a US branch can be subject to both US corporate income tax and the US branch profits tax, on top of Canadian corporate tax on the same income, with foreign tax credits only partly smoothing the total. If anyone connected to the company, including the owner, uses the property personally without paying fair market rent, the CRA can assess a shareholder benefit equal to the value of that use, taxed as if it were a dividend. US real property held inside a Canadian corporation also does not benefit from the personal capital gains treatment or the 871(d) election available to individuals.

Comparing the main structures at a glance

When a larger structure starts to make sense

Once a Canadian owner has multiple US properties, brings in outside investors, or holds property with a genuinely higher liability profile, such as a multi-unit rental or a commercial building, a US limited partnership or a US C-corporation set up with proper cross-border tax advice becomes worth considering. These structures avoid the LLC mismatch because their US tax treatment lines up with how Canada sees them, but they carry real legal and accounting setup costs that are hard to justify for a single condo. The decision at that scale also touches estate tax exposure, since a Canadian's US real property, including shares of some US entities, can fall inside the US estate tax net; that is a separate question worth reviewing alongside the ownership structure itself, not folded into it as an afterthought.

A US C-corporation pays US corporate tax on its rental profit, and a further layer of tax applies when profit is eventually distributed to the Canadian shareholder as a dividend, so it is not a way to avoid double taxation altogether; it is a way to make the timing and the amount predictable in a way an LLC is not. A US limited partnership, by contrast, generally flows income through to its partners in a manner both countries recognize consistently, which is why it shows up more often than an LLC in structures built for multiple Canadian investors pooling money into US real estate.

How we help clients decide

We look at the number of properties, whether other investors are involved, personal-use plans, and liability exposure before recommending a structure, and we are direct when a client is being sold an LLC that would create more tax than it saves. For most single-property owners the conversation ends with personal ownership, proper insurance, and the right elections and withholding forms in place. Our cross-border tax services cover the setup and the ongoing filings either way.