US Capital Gains Tax Rates for Non-Residents: What Canadians Selling Florida Real Estate Actually Pay

Section 01Why the 30 percent number circulates, and why it is wrong for real estate

The Internal Revenue Code taxes non-residents under two distinct regimes. Under IRC §871(a), passive US-source income (FDAP) and a narrow category of capital gains of NRAs present 183 days or more during the tax year are taxed at a flat 30 percent of the gross amount, with no deductions. Under IRC §871(b), income that is effectively connected with a US trade or business is taxed on a net basis at the same graduated rates that apply to US citizens and residents.

Real estate sits in the second regime. IRC §897, enacted as part of FIRPTA in 1980, deems any gain or loss on the disposition of a USRPI by a non-resident to be effectively connected with a US trade or business. Verified fact. Because §897 routes the gain into §871(b), the gain is taxed at graduated rates and qualifies for the same long-term capital gains preferential rates and the same Section 1250 treatment as a US resident's gain on the same property. Sources: 26 USC §871, 26 USC §897, IRS Publication 519.

The 30 percent flat rate confusion comes from two places. First, the language of §871(a)(2), which does impose a 30 percent rate on capital gains of an NRA present 183 days or more in the tax year, is sometimes generalized incorrectly to all non-resident capital gains. Second, FDAP income such as US dividends paid to a Canadian shareholder is genuinely taxed at 30 percent (reduced to 15 percent under the Canada-US treaty), and that figure gets transposed onto real estate. Neither applies to a Canadian selling Florida real estate while remaining a Canadian tax resident.

Section 02Long-term capital gains: 0, 15, or 20 percent in 2026

For property held more than one year, the gain is long-term. The 2026 federal preferential rate brackets, set by IRS Revenue Procedure 2025-32 and indexed annually, are:

A non-resident's taxable income for this purpose is the US-source effectively connected income reported on Form 1040-NR, after deductions allowable to non-residents. For a Canadian whose only US filing event for the year is the sale of a single Florida property, taxable income is essentially the gain itself net of allowable items, so the rate brackets apply directly to the gain. A married couple holding the property as joint tenants or tenants by the entireties files individual Form 1040-NRs (the joint return option is generally unavailable to two non-residents) and each spouse's share of the gain is measured against the single-filer brackets.

Section 03Short-term capital gains: ordinary brackets, up to 37 percent

If the property is held one year or less, the gain is short-term and taxed at the ordinary income brackets that apply to all individual filers, including non-residents. The 2026 ordinary brackets for single filers are 10 percent up to $12,400, 12 percent up to $50,400, 22 percent up to $105,700, 24 percent up to $201,775, 32 percent up to $256,225, 35 percent up to $640,600, and 37 percent above. Verified fact. Source: IRS Rev. Proc. 2025-32.

This treatment is the same as for a US resident. The structural penalty for selling within twelve months is therefore identical for a Canadian non-resident as for a Florida neighbour. Holding period is computed from the day after acquisition to the day of disposition, inclusive.

Section 04Section 1250 unrecaptured gain: the 25 percent ceiling on depreciation recapture

A Canadian who rented the Florida property and reported the rental income to the IRS on Form 1040-NR almost certainly claimed depreciation, either by election or because depreciation is treated as allowed whether or not actually deducted. On the eventual sale, the portion of the long-term gain attributable to that depreciation is "unrecaptured Section 1250 gain" and is taxed at a maximum federal rate of 25 percent. Verified fact. Source: 26 USC §1(h)(6); IRS Topic No. 409.

The amount classified as Section 1250 gain is the lesser of total accumulated depreciation taken (or allowable) or the total long-term gain. Any remaining long-term gain above the depreciation amount is taxed at the regular 0/15/20 percent LTCG brackets. Florida residential rental real estate is depreciated over 27.5 years on a straight-line basis. A Canadian who held a USD 500,000 Florida rental for ten years would have accumulated approximately USD 145,000 of depreciation that becomes Section 1250 gain at sale, regardless of whether the property's market value rose, fell, or stayed flat.

A Canadian who held a Florida property strictly for personal use, with no rental, has no Section 1250 issue. The full long-term gain falls into the 0/15/20 percent brackets. This is one of the few cases where the Canadian who used the property as a vacation home receives more favourable US tax treatment than the Canadian who rented it.

Section 05What Canadian sellers do not pay

The 3.8 percent Net Investment Income Tax under IRC §1411 applies only to US persons (citizens, green card holders, US tax residents). The IRS confirms: "Nonresident Aliens (NRAs) are not subject to the Net Investment Income Tax." Source: IRS Questions and Answers on the Net Investment Income Tax. A Canadian non-resident selling Florida real estate therefore avoids 3.8 percent of additional federal tax that a US resident with the same gain would pay above the NIIT thresholds (USD 200,000 single, USD 250,000 married filing jointly).

Florida levies no state-level individual income tax and no state-level capital gains tax. Florida is one of seven US states with this status. Verified fact. Source: Florida Constitution and Florida Department of Revenue. A Canadian who sells real estate in California, New York, or another state with a state-level cap gains tax would face that additional layer; Florida produces no such layer. This is a structural reason why Florida is more favourable for cross-border sellers than higher-tax states.

The federal Schedule NEC (Form 1040-NR) is not used to report real estate gains. Schedule NEC reports income that is not effectively connected with a US trade or business, taxed at the §871(a) flat 30 percent rate. Because §897 deems real property gains effectively connected, they are reported on Schedule D (Form 1040) attached to Form 1040-NR, with Form 8949 detailing the disposition. The dedicated guide on filing mechanics is at the cross-link below.

Section 06Treaty Article XIII: the US has primary taxing right on US real estate

Under Article XIII(1) of the Canada-United States Income Tax Convention, gains derived by a resident of one contracting state from the alienation of real property situated in the other contracting state may be taxed in that other state. Verified fact. Source: Canada-US Tax Treaty, Article XIII. Read together with Article XXIV (Elimination of Double Taxation), the result is that the US has primary taxing right on the gain, and Canada eliminates double taxation by allowing a foreign tax credit equal to the US federal tax paid, capped at the Canadian tax otherwise payable on the same gain.

Article XIII does not exempt the Canadian seller from US tax. It is a sourcing and ordering rule, not a relief rule. The US graduated rates discussed above apply in full. The relief mechanism is on the Canadian side. The dedicated guide Canada-US Treaty Article XIII: Real Estate Capital Gains covers the full mechanics.

Section 07When does the 30 percent flat rate actually apply to a Canadian?

For the typical Canadian snowbird who spends fewer than 183 days per calendar year in the US, files Form 8840 to claim the closer connection exception when needed, and is treated as a Canadian tax resident throughout the year, §871(a)(2) is not the operative section. The operative sections are §897 (treats the gain as ECI) and §871(b) (taxes ECI at graduated rates).

Section 08Worked example: Quebec couple sells a Boca Raton condo in 2026

A married Quebec couple holds a Boca Raton condo as 50/50 joint owners. They acquired it in 2015 for USD 350,000 (closing costs USD 10,000 included in basis), used it personally for ten years with no rental, and sell it in 2026 for USD 700,000 (USD 35,000 in selling costs).

Realized amount: USD 700,000 minus USD 35,000 in selling costs = USD 665,000. Adjusted basis: USD 350,000 plus USD 10,000 closing = USD 360,000. Total long-term gain: USD 305,000. Each spouse's share (50 percent): USD 152,500.

FIRPTA withholding at closing was 15 percent of the USD 700,000 gross price, or USD 105,000, paid by the buyer's settlement agent to the IRS. After the couple files their two Form 1040-NRs and pays approximately USD 31,000 in actual federal tax, they are owed a refund of approximately USD 74,000, typically received six to nine months after filing. They could have reduced the withholding upfront by filing Form 8288-B before closing; see the dedicated guide.

On the Canadian side, each spouse reports a CAD-equivalent capital gain to the CRA, computed using the Bank of Canada exchange rates at acquisition and at sale, with a 50 percent inclusion rate (Canada's inclusion rate as of 2026 after the Carney government cancelled the proposed increase). Each spouse claims a Canadian foreign tax credit for the US federal tax paid, eliminating most or all of the Canadian tax on the same gain.

Section 09Comparison: Canadian sale of secondary residence (Quebec reference) vs Canadian sale of Florida property

Honest note. Equivalent comparisons for Ontario, British Columbia, Alberta, and other provinces are forthcoming. For now, the Capital Gains Tax Rates by Canadian Province guide covers provincial variation.

Section 10Common mistakes

1. Assuming the 30 percent flat rate applies. It does not, for real property. Apply graduated rates per §897 + §871(b). This is the single most common error in cross-border seller communications, and it is repeated by some otherwise competent US tax forums that conflate FDAP rules with FIRPTA rules.
2. Reporting the gain on Schedule NEC instead of Schedule D. Schedule NEC of Form 1040-NR is for non-effectively-connected income only. Real property gain is ECI by statute and goes on Schedule D + Form 8949 attached to Form 1040-NR.
3. Ignoring Section 1250 unrecaptured gain when the property was rented. The 25 percent ceiling on the depreciation portion of the gain is mandatory whether or not the seller actually deducted depreciation in prior years. The IRS treats depreciation as "allowed or allowable."
4. Treating FIRPTA's 15 percent withholding as the final tax. It is a prepayment of federal income tax. The actual tax is computed on Form 1040-NR and any excess withholding is refunded. A loss sale can result in 100 percent refund of the FIRPTA withholding. See Form 8288-B: FIRPTA Early Refund and Loss Sale and FIRPTA Withholding Recovery.
5. Filing only on the Canadian side. A Canadian non-resident who sells US real property has a US filing obligation regardless of whether the FIRPTA withholding covered the tax. The Form 1040-NR is the only way to recover excess withholding and the only way to officially close the US tax position on the disposition.
6. Forgetting the ITIN requirement. A Canadian seller who does not yet have a US ITIN must apply for one to file Form 1040-NR and to claim the FIRPTA refund. Form W-7 is filed with the return.
7. Computing the gain in CAD on the US return. The US return is computed in USD. The basis is converted to USD using historical exchange rates if the property was acquired in CAD-funded transactions; the sale price is the actual USD amount received.

Section 11Filing checklist

1. Confirm the holding period (more or less than one year from acquisition to disposition).
2. Compute the US-dollar adjusted basis (purchase price + capitalised closing costs + capital improvements).
3. Compute the US-dollar amount realized (sale price minus selling costs).
4. Compute the gain or loss in USD.
5. Identify any Section 1250 unrecaptured gain (depreciation taken or allowable on rental property).
6. Apply the LTCG brackets (held more than one year) or the ordinary brackets (held one year or less). Section 1250 unrecaptured gain ceiling is 25 percent.
7. Confirm no NIIT applies (you are filing as non-resident on Form 1040-NR).
8. Reconcile FIRPTA withholding (Form 8288-A) against the computed tax. The withholding is a prepayment.
9. File Form 1040-NR with Schedule D and Form 8949 attached. Apply for an ITIN via Form W-7 if you do not have one.
10. Report the same gain on the Canadian T1 return at the 50 percent inclusion rate, claim a Canadian foreign tax credit for the US federal tax paid, and report the property's final disposition on Form T1135 if applicable.

Section 12FAQ

Q. I sold my Florida condo at a loss. Does the 15 percent FIRPTA withholding still apply? A. Yes, the buyer's settlement agent must withhold 15 percent of the gross sale price unless an exception applies, regardless of whether the seller has a gain or a loss. The seller files Form 1040-NR to report the loss, recover the full withholding, and claim a Canadian capital loss subject to Canadian rules. Filing Form 8288-B before closing can reduce the withholding upfront.

Q. Can a Canadian use the IRC §121 home-sale exclusion ($250,000 single, $500,000 married)? A. Generally no. The §121 exclusion applies to the sale of a "principal residence." A Canadian non-resident's principal residence is in Canada, not Florida. The exclusion is available only in narrow cases where a Canadian became a US tax resident, used the Florida property as a principal residence under the §121 use-and-ownership tests, and is filing Form 1040 rather than Form 1040-NR.

Q. What if I held the property in a US LLC? A. The tax outcome depends on the LLC's classification. A single-member LLC owned by a Canadian individual is disregarded by default, so the result is identical to direct ownership: the gain is reported on the individual's Form 1040-NR. A multi-member LLC is taxed as a partnership and adds Form 1065 plus K-1 reporting. The dedicated guide Selling via LLC in Florida: Canadian Owners covers structures.

Q. Is the Canadian principal residence exemption available for a Florida property? A. The Canadian principal residence exemption (PRE) can in principle apply to a foreign property, but the property must be designated as the family's principal residence for the relevant years and only one property per family can be designated for any given year. Most Canadians do not and should not designate a Florida vacation property as their PRE. The dedicated guide Canadian Principal Residence Exemption vs. Florida Property covers the trade-off.

Q. Does Florida tax the gain at the state level? A. No. Florida has no state-level individual income tax and no state-level capital gains tax. The only US tax is federal.

Q. When is the Form 1040-NR due? A. April 15 of the year following the sale if the seller had US wage income subject to withholding or operates a US business, or June 15 of the year following the sale otherwise. An automatic six-month extension is available with Form 4868. The extension extends the filing deadline, not the payment deadline.