The Canada–US Tax Treaty and US Estate Tax for Canadians
A retired couple in Calgary own a condo in Arizona and a brokerage account full of US blue-chip stocks. They have heard, vaguely, that the US "doesn't tax estates unless you're a multimillionaire," and assume that rule protects them. It does — but only because of a treaty, and only if they understand how it works. Strip the treaty away and the raw US rule is unforgiving to non-Americans: a mere US$60,000 of US assets can trigger a US estate tax filing. This is one area where a little knowledge genuinely protects a Canadian family.
This guide explains how US estate tax reaches Canadians, what counts as US property, and how the Canada–US tax treaty defuses it for most. It is general information, not advice; cross-border estate tax is specialist work, and the figures should be confirmed for the relevant year.
US estate tax reaches non-residents
The United States taxes the estates of non-residents on assets that are situated in the US — and the exemption it gives non-resident aliens is tiny: only US$60,000 of US-situs assets.[1] Above that, a US estate tax return (Form 706-NA) can be required, and US estate tax rates run from 18% up to 40%.[2] For a Canadian, the threshold question is therefore not "am I rich by US standards?" but "do I own US-situs assets, and how much?"
What counts as US-situs property
The two categories that catch Canadians are:
- US real estate — a vacation home in Florida, Arizona, or Palm Springs.
- Shares of US corporations — and critically, these are US-situs even when held in a Canadian brokerage account, an RRSP, or a TFSA.[3]
By contrast, US bank deposits are generally not US-situs, and Canadian-domiciled funds that hold US stocks are treated differently from directly held US shares — a distinction that is itself a planning tool. The point for most Canadians: you can have meaningful US-situs exposure without ever buying US real estate, simply by holding US stocks.
The treaty does the heavy lifting
Left at the $60,000 statutory exemption, a great many Canadians would face US estate tax. The Canada–US tax treaty prevents that for most. Article XXIX B lets a Canadian resident claim a pro-rated share of the much larger US unified credit, based on the ratio of US assets to the worldwide estate.[3] In practical terms for 2026, US estate tax generally only becomes payable where the worldwide estate exceeds roughly US$15 million, and the treaty also provides relief for assets passing to a spouse.
The catch is the filing-versus-paying distinction: a Canadian may owe no US estate tax after the treaty credit, yet still be required to file Form 706-NA to claim that credit if US-situs assets exceed US$60,000. Owing nothing is not the same as filing nothing.
Avoiding double tax with Canada
There is potential overlap with Canada, because Canada taxes the capital gain on the deemed disposition of the US property at death, while the US may tax its value. The treaty and Canada's foreign tax credit rules are designed to relieve this double taxation, generally by allowing US estate tax to be credited against Canadian tax on the same property. Making the two systems mesh correctly is precisely the kind of thing a cross-border specialist exists for.
Planning — but get specialist advice
Canadians with significant US exposure sometimes use structures such as Canadian-domiciled funds holding US equities, certain corporate or partnership arrangements, or life insurance to fund the potential tax. Each carries trade-offs and is highly fact-specific, and some structures that look attractive create other problems. This is not DIY territory: if you own a US property or substantial US securities, get cross-border tax and legal advice.
What we focus on at It's Simple Will
The Will Creator makes a valid Canadian will for your Canadian estate; the US estate tax layer on US-situs assets is a specialist cross-border matter that sits alongside it. Our guides aim to help you recognize when your US assets have crossed into that territory so you can get the right advice. For the broader picture, see Canadians with foreign investments at death.
Related guides
Citations & sources
- [1]Some nonresidents with US assets must file estate tax returns (Form 706-NA) — Internal Revenue Service (US)
- [2]International Estate and Gift Tax Examinations (IRM 4.25.4) — Internal Revenue Service (US)
- [3]US estate tax issues for Canadians — BDO Canada
Frequently asked questions
Can a Canadian owe US estate tax?
Yes, if they own US-situs assets at death. US estate tax applies to non-residents on property situated in the US, and a US estate tax return (Form 706-NA) can be required once US-situs assets exceed US$60,000 — even if, after the treaty credit, no tax is actually owed. Most Canadians with modest US assets owe nothing, but the filing obligation can still arise.
What counts as US-situs property?
Most importantly, US real estate (such as a Florida condo) and shares of US corporations (such as Apple) — and the shares are US-situs even when held in a Canadian brokerage account, an RRSP, or a TFSA. US bank deposits are generally not US-situs. The treatment of US-listed versus Canadian-listed ETFs is a planning detail worth specific advice.
What is the $60,000 figure?
It is the limited statutory exemption the US gives non-resident aliens — only US$60,000 of US-situs assets, far below the exemption US citizens get. On its own that would expose many Canadians, which is exactly why the Canada–US tax treaty matters.
How does the Canada–US tax treaty help?
Article XXIX B of the treaty lets a Canadian resident claim a pro-rated share of the much larger US unified credit, based on the proportion of US assets to worldwide estate. For 2026 that generally means US estate tax only becomes payable where the worldwide estate exceeds roughly US$15 million, with relief also available for transfers to a spouse.
Is there double tax with Canada?
There can be overlap, since Canada also taxes the capital gain on the deemed disposition of the US property at death. The treaty and Canada's foreign tax credit rules are designed to relieve double taxation, generally by crediting US estate tax against Canadian tax on the same property. Coordinating the two is a job for a cross-border tax specialist.
How do Canadians reduce US estate tax exposure?
Options that are sometimes used include holding US securities through Canadian-domiciled funds, certain corporate or partnership structures, or life insurance to fund the potential tax. Each has trade-offs and is highly fact-specific. This is firmly specialist planning — get cross-border tax and legal advice before acting.