Americans living in other countries still need to pay taxes to the U.S., and the IRS is very good about making sure they do. A well-respected Canadian newspaper, The Globe and Mail, recently explored the responsibilities of Americans living over the northern border in the article,“Americans living in Canada: Be aware that the IRS is watching you.”
Principal place of residence. When U.S. citizens sell their principal residence in Canada, they’re not taxed on the gain by the Canada Revenue Agency (CRA). However, the IRS will tax the portion of the gain that exceeds $250,000. The problem is that if there’s no capital gains tax paid in Canada, there are no foreign tax credits available to offset tax owed in the U.S.