Who is subject to US Estate Tax?
- US Citizens and US residents on their worldwide estate.
- Non-Resident Aliens (individuals who are not US citizens or US residents) on their US situs assets (regardless of where you live)
What is a US Situs Asset?
- US Real Estate
- US Stocks or Bonds that are:
- Held in US brokerage accounts;
- Held privately;
- Held in Canadian brokerage accounts (excludes shares of Canadian mutual funds); or
- Held in Canadian registered investment accounts (Registered Retirement Savings Plan (RRSP), Registered Retirement Income Fund (RRIF) or Tax-Free Savings Account (TFSA)).
- Tangible property permanently situated in the US (vehicles, art, boats, jewelry in safety deposit box etc.)
- Debts of US companies or US persons
- Interests in US qualified retirement plans or annuities, including certain IRA accounts and 401(k) plans
How is US Estate Tax Calculated?
- Calculated on a graduated tax rate system, maximum tax rate is 40%
- Calculated on the full fair market value of your US situs assets (i.e. not just the inherent capital gain) less certain deductions and exemptions.
What are my filing and tax obligations as a Canadian resident?
| US Form 706-NA | US Estate Taxes Owing | |
|---|---|---|
| US Situs Assets < $60,000 USD
(Value of worldwide estate does not matter) |
No filing Requirement | Not subject to US estate tax |
| US Situs Assets > $60,000 USD BUT your worldwide estate is LESS than $12,920,000 USD* |
The executor of your estate must file US Form 706-NA regardless of whether there is a US estate tax liability | Not subject to US estate tax |
| US Situs Assets > $60,000 USD AND your worldwide estate is MORE than $12,920,000 USD* |
The executor of your estate must file US Form 706-NA regardless of whether there is a US estate tax liability | May be subject to US estate tax |
* $12,920,000 is the estate tax exemption for 2023. This will decrease to $5,000,000 (indexed for inflation) on January 1st, 2026. The exemption could be subject to change prior to January 1, 2026 under President Biden’s administration.
US Form 706-NA
- Due 9 months after the date of death (6 month extension available if requested on time)
- Subject to significant penalties if filed late or taxes paid late.
Other
- If you hold property in an individual state, you may be subject to estate tax in that state
Changes to tax law occur frequently and, at times, retroactively. Any advice herein is based on tax law as it currently stands including administrative and judicial interpretation. If the law or its interpretation changes, our advice may not be appropriate. We are not responsible for updating the advice herein for subsequent changes in tax law or the interpretation thereof.
