Kristopher McEvoy, cross-border tax expert and co-founder of LEAP ACT, recently joined Glenn Sutherland on A Canadian Investing in the US to break down a proposed piece of US legislation that’s raising concerns for Canadian investors: Section 899 of the Big Beautiful Tax Bill.
If you’ve been hearing about changes to US tax law and wondering how it might affect your investments, this episode covers what’s being proposed, why it matters, and what Canadian investors should be doing now to prepare.
What’s This “Big Beautiful Bill” All About?
The bill, nicknamed by former US President Donald Trump, is broad and far-reaching. But the part that’s raising eyebrows, especially for Canadians, is Section 899. This section proposes significant changes to withholding tax rates for foreign investors, including those in Canada.
Currently, under the tax treaty between Canada and the US, Canadians benefit from lower withholding tax rates (typically 15% on dividends). This new bill proposes increasing those rates by 5% each year, potentially reaching as high as 35%.
That kind of hike could make investing across the border a lot more expensive and complicated.
Key Takeaways from the Interview
- The bill doesn’t introduce new taxes. It proposes raising rates on existing ones, such as withholding taxes on dividends and FIRPTA.
- Canadian investors currently benefit from a treaty rate. Those lower rates could be phased out if the bill passes.
- FIRPTA withholding could increase, adding to delays and costs when selling US real estate.
- The bill is viewed as retaliation against countries (including Canada) that have digital services taxes affecting US companies.
- It’s not law yet. The bill still needs to pass through the US legislative process.
- Good structuring matters more than ever. How you bring money into and out of the US (loan vs. equity, dividend vs. repayment) could impact your tax burden significantly.
- Now is the time to review your cross-border setup, especially if you’ve been operating in your personal name or without proper structure.
Why This Matters for Canadian Investors
If you’re investing in US real estate or thinking about it, these proposed changes are a big deal. They could impact how much tax you pay, how long it takes to get your money back, and even how you plan your long-term investment strategy.
More importantly, the proposed bill is a reminder of just how critical it is to have the right structure and expert guidance in place from the beginning. As Kris points out, planning how you move money between Canada and the US isn’t just a paperwork issue. It can significantly affect your bottom line.
What Should You Do Now?
Kris recommends reviewing your current structure and planning how you take money out of the US. Is it as a dividend? A loan repayment? Interest? Each has different tax implications, especially as withholding rates change.
And if you’ve been operating in your personal name without a proper US-side corporate setup, now’s the time to fix that. Delaying could end up costing you more down the road.
Talk to a Cross-Border Tax Specialist
If all this sounds complicated, it is. That’s why working with someone who truly understands cross-border investing is key. Kris and his team at LEAP ACT specialize in helping Canadians invest in the US smartly and efficiently.
Need help structuring your investments or reviewing your tax strategy?
Get in touch with Kris McEvoy and book a time to talk.