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Mortgage broker cross-border tax: FIRPTA literacy that keeps US deals together
A mortgage broker's cross-border file is mostly about clients: every Canadian buying or selling US property runs into FIRPTA withholding, and the broker who can explain the 15% rule before the lawyer does keeps the deal calm and the referral warm. Your own side is smaller but real — US referral fees that need a W-8BEN, and commission income whose structure decides how much of it you keep.
By the AnalytIQ Accounting team · Last reviewed: August 12, 2026
FIRPTA is your file whether your client buys or sells
When a Canadian client sells US real estate, the buyer must withhold under FIRPTA — generally 15% of the gross sale price, not the gain. On a $700,000 USD Florida condo that is $105,000 USD held back at closing, usually far more than the real tax, and the refund arrives only after a 1040-NR is filed and processed. A broker who warns the client early looks like the professional in the room; one who doesn't fields the panicked call a week before closing.
It cuts the other way too. When your client is the buyer and the seller is a foreign person, your client is the withholding agent — personally liable if the tax isn't remitted on Forms 8288 and 8288-A. The escrow and title people handle mechanics, but the obligation sits on the purchaser, and Canadian buyers of US property from other non-residents are surprised by that every time.
| Sale price (USD) | Buyer will use as residence | FIRPTA withholding |
|---|---|---|
| $300,000 or less | Yes | 0% |
| $300,001 – $1,000,000 | Yes | 10% of gross price |
| Any price | No residence-use plan | 15% of gross price |
The pressure valve is Form 8288-B: filed on or before closing, it asks the IRS to cap withholding at the actual expected tax on the gain. It needs a US tax ID — a W-7 ITIN application for most Canadian sellers, which has its own processing queue — and a supportable gain calculation, so it is a weeks-before-closing project, not a day-of one. The earlier a selling client is referred, the more of their equity stays out of IRS limbo.
The financing questions behind a US purchase
A USD mortgage is itself a tax instrument for a Canadian borrower. Pay it down or refinance after the exchange rate has moved and the debt repayment can crystallize a foreign-exchange gain CRA taxes, invisible until we reconstruct the borrowing history. Clients who refinanced a Phoenix property during a weak-CAD stretch rarely know this happened.
Interest deductibility is the other briefing point. On a US rental, mortgage interest is deductible against rental income on the Canadian return, and on the US side only if the client makes the net-rental election on a 1040-NR instead of eating 30% withholding on gross rents. And the deduction follows the use of the borrowed money, not the security: a client who funds the purchase from a HELOC on their Brampton home still deducts that interest against the US rental, while a HELOC drawn for a personal vacation condo deducts nowhere. Brokers don't need to run those returns — they need to know the questions exist, and where to send them. Our snowbird US property guide covers the ownership side in depth.
Referral fees from US partners
Fees from US agents, lenders, or cross-border brokerages are business income on your Canadian return, converted to CAD. On the US side, a fee for work you performed in Ontario is foreign-source income — with a W-8BEN (or W-8BEN-E for your corporation) on file, the US payer shouldn't withhold, and no US return is normally required. Whether a given referral arrangement is permitted at all is a licensing question — US mortgage rules restrict referral compensation — so we treat that as a flag for your compliance counsel, and we handle the tax once the income is legitimate.
Structuring your commissions at home
Commission structure decides your after-tax outcome more than any deduction. Where a brokerage pays remuneration to an agent's corporation — a brokerage-policy and FSRA-compliance question before it is a tax one — earnings retained in the company face Ontario's combined 12.2% small-business rate instead of top personal rates, funding the gap between closings. Two mechanics are specific to your world:
- No HST on commissions. Arranging for a loan is an exempt financial service, so brokerage commissions carry no HST — and the flip side is no input tax credits on your costs.
- Lumpy income, quarterly instalments. A strong spring market creates instalment obligations the following year; we set the schedule so a slow winter doesn't meet a CRA payment demand.
Whether incorporation clears the bar for your volume is a numbers exercise — we run it as part of a mortgage broker incorporation engagement, not a rule of thumb.
Source: IRS — FIRPTA withholding.
Common questions.
My client is selling in Florida — how much gets held back at closing?
Generally 15% of the gross sale price under FIRPTA, dropping to 10% or 0% only for lower-priced homes the buyer will live in. A Form 8288-B filed before closing can cap withholding at the actual expected tax, but it needs lead time.
Does FIRPTA matter when my client is the buyer?
Yes — the buyer is the withholding agent. If the seller is a foreign person and the tax is not withheld and remitted, the IRS can pursue your client for it, so the seller's status needs to be confirmed before closing.
Do I owe US tax on referral fees from American partners?
Normally no — fees for work performed in Canada are foreign-source, and a W-8BEN on file stops US withholding. The income is fully taxable in Canada, and whether the referral arrangement is permitted is a separate licensing question.
Related reading
Deals that survive the border.
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