Selling U.S. Real Property in 2025: Avoiding Tax Pitfalls and Refund Delays for Canadian Residents

April 10, 2025

In 2020, Canadians faced critical decisions on what to do with their U.S. real property interests. Due to travel restrictions from the Covid-19 pandemic, many could not visit the U.S. as usual. At the same time, prices in many U.S. markets increased dramatically – giving Canadians further pause on whether to continue owning their vacation or investment properties. In the end, many Canadians sold their U.S. properties in 2020 and 2021.

Back in 2020, we wrote about the Canadian and U.S. tax issues facing Canadians selling U.S. real properties. In 2025, continuing market uncertainties combined with announced U.S. immigration and economic policies are forcing Canadian families to face similar decisions they did five years ago. This blog entry reminds Canadians of these tax issues and updates our comments from five years ago.

Our 2020 blog, summarizing the common Canadian and U.S. tax issues from selling U.S. real property, is at this link.

Update to 2025

U.S. Federal Tax Refund Delays

Canadians selling their U.S. real property often receive U.S. federal tax refunds because the U.S. federal tax withheld on sale (the Foreign Investment in Real Property Tax Act or FIRPTA) generally exceeds the final U.S. federal tax liability. However, we frequently see delays of over a year for clients receiving these refunds due to:

Failure by the seller to consider alternative ownership structures or correct U.S. status of the entity selling property on closing;
Errors made by the U.S. escrow company on closing;
Internal Revenue Service (IRS) staffing shortages resulting in delays;
Mismatches between names on IRS tax slips and the name of the ultimate seller;
Sellers not having U.S. tax identification numbers either at closing or before filing the U.S. tax return;
IRS checks being delayed or lost in the mail.

Many of these issues can be avoided by reviewing the U.S. escrow company documents in advance, obtaining U.S. taxpayer identification numbers before or shortly after the sale, reviewing ownership structures and alternatives before the sale, opening U.S. bank accounts, and setting up electronic filing of U.S. tax returns when possible.

U.S. Identification Numbers

Individual Canadians selling U.S. real property will need to apply for or renew U.S. Individual Taxpayer Identification Numbers as part of filing U.S. federal tax returns. In prior years, Passport Canada could issue certified copies of Canadian passports to assist with these applications. Since Passport Canada no longer affixes acceptable seals acceptable to the IRS to these copies, the IRS now rejects them as part of the application, thus requiring the services of a U.S. notary or a IRS Certified Acceptance Agent.

Andersen Canada has Certified Acceptance Agents in Alberta and British Columbia who can assist sellers across Canada.

Andersen Canada Can Help

Andersen Canada has the experience and expertise to help Canadians with their U.S. and Canadian tax needs before, during and after closing. We can work with you to minimize common errors and delays, helping you obtain your U.S. tax refunds as efficiently as possible.

Please contact us if you are selling U.S. real property.