Form 8938 for Canadian Landlords in Ohio

# Form 8938 for Canadian Landlords with Ohio Rental Property ## What Is Form 8938? Form 8938, "Statement of Specified Foreign Financial Assets," is a US tax reporting requirement under the Foreign Account Tax Compliance Act (FATCA). It requires US persons to disclose foreign financial assets that exceed specified thresholds. Unlike FBAR reporting (FinCEN Form 114), Form 8938 is filed *with* your US tax return (Form 1040 or 1040-NR) rather than separately. The IRS uses Form 8938 to ensure US taxpayers are reporting worldwide income and complying with federal tax obligations. For Canadian landlords who are US citizens or green card holders, this typically means reporting Canadian bank accounts, investment accounts, registered accounts (RRSPs, TFSAs), and other specified foreign financial assets. ## How FATCA Applies to Your Ohio Rental Situation As a Canadian landlord owning rental property in Ohio, you occupy a unique tax position. You're likely a US person filing a Form 1040-NR (US tax return for nonresidents) to report Ohio rental income. Simultaneously, you're a Canadian resident filing a Canadian T1 return to report worldwide income, including that same Ohio rental property. **The asset reporting threshold for Form 8938 is:** - **$50,000** on the last day of the tax year (or any day during the year) for unmarried filers - **$100,000** on the last day of the tax year for married couples filing jointly - **$100,000** on the last day of the tax year (or $400,000 at any time during the year) for married couples filing separately in certain situations For most Canadian landlords, if you hold Canadian bank accounts, investment portfolios, RRSPs, or TFSAs exceeding $50,000 USD equivalent, you'll need to file Form 8938. ## Who Must File Form 8938 You must file Form 8938 if you meet ALL of these criteria: 1. **You are a US person** — this includes US citizens, green card holders, and individuals meeting the substantial presence test (SPT) 2. **You have specified foreign financial assets** exceeding the filing threshold on the last day of your tax year or at any point during the year 3. **You are required to file a US tax return** — since you have Ohio rental income, you're already filing a Form 1040-NR **Specified foreign financial assets include:** - Foreign bank and savings accounts - Foreign investment accounts (brokerage accounts) - Registered retirement savings plans (RRSPs) - Tax-free savings accounts (TFSAs) - Registered education savings plans (RESPs) - Life insurance contracts with a cash value component - Foreign real property (however, your Ohio rental property is NOT a specified foreign asset under FATCA, though it may be reportable elsewhere) Canadian currency holdings in checking accounts and safety deposit boxes also count. ## Step-by-Step: How to Complete Form 8938 ### Step 1: Calculate Your Total Foreign Assets in USD Convert all Canadian financial assets to US dollars using the exchange rate on December 31 of the tax year (or the date specified by the IRS for that year). The IRS publishes daily exchange rates. **Example:** If you hold 150,000 CAD in an investment account and the USD/CAD rate is 0.75 on December 31, your US dollar value is $112,500 USD. ### Step 2: Determine If You Meet the Threshold Add up all specified foreign financial assets: - Canadian bank accounts: $45,000 USD - RRSP: $55,000 USD - TFSA: $25,000 USD - **Total: $125,000 USD** Since this exceeds $50,000, you must file Form 8938. ### Step 3: Complete Part I — Summary In Part I, indicate the maximum value of your foreign financial assets during the year. For the example above, you'd report approximately $125,000 USD (or the highest monthly value, whichever is greater). ### Step 4: Complete Part II — Specified Foreign Financial Assets List each separate asset: - **Asset description** (e.g., "Canadian Royal Bank account") - **Asset location** (e.g., "Toronto, Ontario, Canada") - **Identifying number** (account number, policy number, or CUSIP) - **Maximum value in USD** during the year Attach a continuation sheet if you have more than four assets. ### Step 5: Attach to Form 1040-NR Form 8938 must be attached to your Form 1040-NR when filed. For most US nonresident aliens, the deadline is **April 15** of the following year, or October 15 if you extend your filing deadline. ## Ohio-Specific Considerations for Landlords ### Ohio State Income Tax and Form 8938 Ohio imposes a state income tax on rental income at **3.99%** for residents and certain nonresidents. As a nonresident landlord, you must file an Ohio state return (Form IT 1040-NR or IT 1040-ES/NR) to report rental income. Importantly, **Form 8938 is a federal requirement only** — Ohio does not require a separate state-level FATCA filing. However, Ohio's Department of Taxation does exchange information with the IRS, so accurate federal reporting indirectly affects state compliance. ### Property Tax and Financial Assets Ohio's average effective property tax rate is **1.59%** of property value. While property taxes don't directly affect Form 8938 reporting, the rental income generated from your Ohio property (after deducting property taxes, mortgage interest, repairs, and depreciation) affects your worldwide income calculation on both Form 1040-NR and your Canadian T1 return. ### Canada-US Tax Treaty Implications Under Article IV of the Canada-US Income Tax Treaty, you may qualify as a resident of Canada for treaty purposes, which can provide relief from double taxation. However, treaty residency status does not eliminate Form 8938 filing obligations. You must still report your Canadian financial assets on Form 8938 if they exceed the threshold. ## Foreign Tax Credit Coordination If you're subject to Canadian tax on investment income generated by your foreign financial assets (e.g., interest from your Canadian bank account), you may claim a **foreign tax credit** on Form 1040-NR. However, Form 8938 is purely an information report — it does not itself generate credits or deductions. It ensures the IRS can verify that you've reported all income associated with those foreign assets. ## Common Mistakes Ohio Landlords Make **1. Forgetting to Include RRSPs and TFSAs** Many landlords overlook registered accounts. If your RRSP and TFSA combined exceed $50,000 USD, you must report them, even though they may have minimal taxable income in a given year. **2. Using Incorrect Exchange Rates** Always use the IRS-specified exchange rate for December 31. Using daily transaction rates or average rates throughout the year is incorrect. **3. Confusing Form 8938 with FBAR Requirements** Form 8938 and FinCEN Form 114 (FBAR) have different thresholds, definitions, and deadlines. If you have Canadian bank accounts exceeding $10,000 USD at any point during the year, you must file an FBAR (deadline: April 15 with automatic extension to October 15) *in addition to* Form 8938 if other specified assets exceed $50,000. **4. Not Reporting the Ohio Rental Property on Schedule E** Your Ohio rental property itself is not a "specified foreign financial asset" under FATCA, but the rental income *is* taxable on Form 1040-NR. Ensure you're reporting this separately on Schedule E (or equivalent on Form 1040-NR). **5. Failing to Coordinate with Canadian Reporting** Your Canadian T1 return also requires disclosure of foreign income. Ensure your Ohio rental income and any US-source investment income are reported consistently on both returns. ## Key Deadlines | Deadline | Action | |----------|--------| | **April 15** | File Form 1040-NR with attached Form 8938 | | **October 15** | Extended deadline (if extension is filed) | | **June 15** | Extended deadline for Canadian T1 return (if applicable) | ## Key Takeaways for Ohio Landlords - **Form 8938 must be filed if your Canadian financial assets exceed $50,000 USD** — this includes bank accounts, RRSPs, TFSAs, and investment accounts converted to US dollars using December 31 exchange rates. Attach it to your Form 1040-NR by April 15. - **FATCA reporting is