Tax Strategy: Marriage affects tax exemption on principal home
21.05.12
The impact of marriage on the principal-residence exemption and tax obligations in the U.S. for Canadian citizens were among the topics raised in the latest batch of reader letters. Hereâs what they wanted to know.
Q: âIf two people who own their own homes get married, how does the principal-residence exemption apply?â
A: A couple can designate only one property as principal residence, so marriage has the effect of eliminating the exemption for one of the two properties. If you keep both and real estate continues appreciating, the increase in market value of one property from the time of the marriage has tax implications. If you sell one property before the marriage, thatâs not an issue since each partner is entitled to claim the principal-residence exemption for the years they were on their own.
Q: âI have a daughter who is a Canadian citizen but has permanent residency in the U.S. and is married to a U.S. citizen. Sheâs currently at home raising a daughter, but when she gets employment will she have to pay U.S. taxes and report her income in Canada as well?â
Source: Montreal Gazette