Hawaii Landlord with Quebec Rental Property

Hawaii and Quebec are opposite ends of the country in almost every sense — the Pacific and the St. Lawrence, English-and-Hawaiian and French — and there's no established route between them. A Hawaii resident who owns a rental in Quebec is nearly always a particular story: a Quebecer who took a job in the islands and kept the Montreal condo, a Hawaii resident who inherited a family property near Quebec City, or a cross-border household split between the two. If you're a US person in Hawaii renting out Quebec property, you have tax obligations on both sides of the border — plus a Hawaii state tax layer, and Hawaii's is among the steepest in the country.

This guide covers the CRA + IRS workflow specifically for the Hawaii → Quebec case. Quebec has one important wrinkle other provinces don't: Revenu Québec administers Quebec's own income tax, so you might expect a separate Quebec return on top of the federal one. For a non-resident's rental income, the surprising and welcome result is the opposite — you deal with the CRA only. The Quebec provincial layer stays out of the picture until you sell. Two principles framed up front: Canada taxes your Quebec rent first because the property sits in Canada — starting with a flat 25% withholding on gross rent — and Hawaii does levy its own state income tax, so your US side is federal plus Hawaii.

Why Hawaii → Quebec specifically

Before the tax detail, the corridor shapes the properties in play:

• This is a low-volume, life-event corridor. There is no seasonal or snowbird link between Quebec and Hawaii; the owners here are people whose work, family, or an inheritance left a property in one place and a home in the other — a Montreal or Quebec City home kept after a move to the islands is the most common origin.
• Quebec's rental market is structurally tight. Greater Montreal carries persistently low vacancy and steady rents, so a Quebec rental tends to be a reliable income property even managed from far away.
• Distance makes a property manager essential. From Hawaii you can't practically self-manage a Quebec unit, so these owners almost always use a Quebec property manager or resident agent — which matters for the withholding rules below, since the payer of the rent is the one legally on the hook.

Common Quebec markets for this owner: Montreal and the surrounding Greater Montreal hubs — Laval, Longueuil, and Brossard — plus Quebec City (the provincial capital) and Gatineau across the river from Ottawa.

The Big Picture: You File in Both Countries

Two tax authorities have a claim on your Quebec rental income:

• Canada (CRA) taxes it first because the property is physically in Quebec. Canadian-source income earned by a non-resident is taxed in Canada — starting with withholding at the source, then reconciled down to tax on net income via a Section 216 return.
• The United States (IRS) taxes it too because you are a US person and the US taxes worldwide income. The same rent goes on your Schedule E, converted to US dollars — and it also flows onto your Hawaii state return.

Left alone, that would be double taxation. The Canada-US tax treaty and the US Foreign Tax Credit (Form 1116) prevent it: the credit lets you subtract the Canadian tax you paid from your US tax on the same income. The net result — you generally pay the higher of the two countries' tax on that rent, not the sum.

Key point most people miss: your Canadian tax status for this income is non-resident, even if you hold Canadian citizenship too. Canada taxes based on residency, not citizenship. Living in Hawaii makes you a non-resident of Canada for the rental income — and the 25% withholding regime below applies to you.

CRA Side: The Canadian Chain

Part XIII: the default 25% withholding

Under Part XIII of the Canadian Income Tax Act, whoever pays rent to a non-resident of Canada must withhold 25% of the gross rent and remit it to CRA — gross, before any expenses. On $2,000/month rent, that's $500 sent to CRA every month, $6,000 a year.

Who does the withholding? The payer is legally responsible — usually your Quebec property manager acting as your Canadian resident agent, a resident agent you formally appoint, or your tenant directly if rent is paid straight to you with no agent. In practice, the right move is to appoint a Canadian resident agent so the withholding is handled properly.

The remittance deadline: the withheld tax is due to CRA by the 15th day of the month following the month the rent was paid or credited. Miss it and the payer (agent or tenant) is personally liable for the unremitted amount plus interest.

This 25%-on-gross default is deliberately blunt — it ignores your mortgage interest, property tax, insurance, and every other expense. The next two mechanisms fix that.

NR6: cut withholding to net (file before the year)

The NR6 is CRA's pre-fix. Filed before the calendar year begins, it lets your withholding agent remit 25% of your estimated net rent (gross minus projected deductible expenses) instead of 25% of gross. On a mortgaged Montreal condo, that typically cuts the monthly withholding sharply — keeping cash in your hands during the year instead of waiting for a refund.

The NR6 is signed by both you and your Canadian agent, who undertakes to ensure a Section 216 return gets filed. The catch is the deadline: CRA must receive it before the first rental payment of the year, so the practical window is November-December of the prior year. Miss it and you simply recover the over-withholding later via Section 216.

The NR4 slip: your year-end Canadian record

After year-end, your withholding agent issues an NR4 slip — the CRA information slip documenting the gross rent paid to you and the Canadian tax withheld. It's due by March 31 following the calendar year (CRA guide T4061), so your 2025 NR4 arrives by the end of March 2026. The NR4 is the pivot document: it supports your Section 216 return and is the evidence of Canadian tax paid you'll use for the US Foreign Tax Credit.

Section 216: get taxed on net income (usually a refund)

The Section 216 return is the centerpiece of the Canadian side. Whether or not you had an NR6, you can file it after year-end to be taxed on your net rental income (rent minus deductible expenses) at Canada's graduated rates instead of the flat 25% on gross. For nearly any landlord with a mortgage and real expenses, tax on net is far below 25% of gross — so CRA refunds the difference.

The deadline depends on whether you had an NR6:

• With an approved NR6: the Section 216 return is due June 30 of the following year. Missing it lets CRA reassess the full 25% on gross as if the NR6 never existed — the single most expensive mistake in this process.
• Without an NR6 (filing purely to recover over-withholding): you have two years from the end of the tax year.

The Quebec difference: no separate Revenu Québec return for the rent

Here is where Quebec departs from Ontario, British Columbia, or Alberta. Quebec runs its own income tax through Revenu Québec, and a Quebec resident files a separate provincial return (the TP-1). You might reasonably expect the same on your rental income — but as a non-resident, you don't.

Rental income from real property is not treated as "earned in a province" for a non-resident. So on your federal Section 216 return, instead of provincial tax, the CRA applies the federal surtax for non-residents — 48% of the basic federal tax — in place of a province's tax. The practical effect: you settle your entire Canadian tax on the Quebec rent with the CRA, and you do not file a separate Quebec (Revenu Québec) return for the rental income. One Canadian return, one Canadian tax authority for the rent. (Quebec's own tax layer returns only when you sell — see below.) This federal figure is the Canadian tax that flows through to your US Foreign Tax Credit.

IRS Side: US Federal and Hawaii State Tax

Schedule E on your 1040

Because you are a US person, the IRS taxes your worldwide income — including the very same Quebec rent Canada already taxed. You report it on Schedule E attached to your Form 1040, converting every figure from CAD to USD (rent, mortgage interest, property tax, insurance, management fees, repairs), commonly using a yearly average exchange rate. You deduct US-side expenses against the rent, so you report net rental income to the IRS, not gross.

Form 1116: the Foreign Tax Credit that stops double taxation

This is the mechanism that makes the two-country arrangement work. Form 1116 (Foreign Tax Credit) lets you credit the Canadian tax you paid against your US tax on the same income, dollar-for-dollar (subject to limits). The credit is capped at the US tax that would have been due on that foreign income — so if Canada taxed the rent at a higher effective rate than the US would, you don't get money back from the IRS, but you owe no US tax on it. The Canada-US treaty backs this up (Article XXIV, "Elimination of Double Taxation").

The credit is based on the actual Canadian tax you paid — the federal tax plus non-resident surtax settled on your Section 216 return, not the gross Part XIII withholding on the NR4. If you were over-withheld at 25% of gross and recovered the excess via a Section 216 refund, only the net Canadian tax you actually kept paying counts. This creates a sequencing issue: you can't finalize Form 1116 until your Section 216 return produces the actual Canadian tax figure, so settle the Canadian side first.

Hawaii state tax — the extra layer (with a credit for the Canadian tax)

Unlike a landlord in Florida or another no-income-tax state, a Hawaii resident also owes Hawaii state income tax on this rental income — and at rates that make it matter: Hawaii's top marginal rate is around 11%, the highest of any US state. Hawaii taxes its residents on worldwide income, so the same Quebec rent that appears on your federal Schedule E also flows onto your Hawaii return.

• Hawaii generally starts from federal adjusted gross income, so the net rental figure carries over from your 1040 — though Hawaii applies its own additions and subtractions, so confirm the state treatment with a Hawaii CPA.
• Hawaii credits the Canadian tax. Under HRS §235-55 (and Haw. Admin. R. §18-235-55), Hawaii's resident credit for income tax paid to another jurisdiction expressly defines that "jurisdiction" to include "any foreign country" — so the Canadian tax (federal plus the non-resident surtax) you pay on the rental is credited against your Hawaii tax on the same income, capped at the Hawaii tax on that income. This is the state-level analog to the federal Form 1116, and with an 11% top rate the credit is especially valuable — it relieves most or all of the state-level double taxation.
• Hawaii's General Excise Tax (GET) does not apply. The GET is a tax on business activity conducted in Hawaii; a rental property situated in Quebec, Canada, is not Hawaii-situated activity, so no GET is due on the Canadian rent.

The practical upshot: at the Hawaii level, the HRS §235-55 credit for your Canadian tax generally prevents double taxation much as the federal Form 1116 does federally — which matters more here than in most states, given Hawaii's 11% top rate. Have a Hawaii-aware cross-border CPA confirm the credit and run the numbers.

FBAR and Form 8938

Owning a Quebec rental usually means a Canadian bank account — rent in, expenses out — which can trigger two US foreign-account disclosures:

• FBAR (FinCEN Form 114): required if the combined value of your foreign financial accounts exceeds $10,000 USD at any point in the year. A Canadian rental deposit account counts. Filed electronically with FinCEN, separate from your tax return.
• Form 8938 (FATCA): a separate IRS form filed with your 1040 if your foreign financial assets exceed its higher thresholds.

These are information reports, not extra tax, but the penalties for missing them are severe. Many US owners of Canadian rentals file both.

When You Sell: Two Clearance Certificates (Canada's FIRPTA, twice)

Selling is where Quebec's provincial layer finally appears — and it means two withholdings and two clearance certificates instead of one. Canada taxes non-residents on the capital gain from Canadian real property, and to secure that tax the buyer (through their notary) holds back tax from the gross sale price until you obtain clearance:

• Federal: a 25% holdback on the gross sale price, cleared with a T2062 Certificate of Compliance from the CRA — the Canadian analog to FIRPTA, the US regime that does the same to foreign sellers of US real estate.
• Quebec: an additional 12.875% holdback, cleared with Form TP-1097-V from Revenu Québec.

You (or your notary) file both notifications within 10 days of the sale — earlier is better, since the certificates can take weeks and ideally issue by closing. Each certificate lets the tax authority compute tax on your actual gain rather than gross proceeds and release the excess holdback. Missing the deadline carries a penalty of up to $5,000 (up to $2,500 federal and $2,500 Quebec). On the US side, the same sale is reported on your 1040 (and your Hawaii return), and the Canadian capital-gains tax — federal and Quebec — is again creditable via the Foreign Tax Credit.

The Annual Cycle for Hawaii → Quebec

1. Before the year (Nov-Dec): file an NR6 if you want reduced withholding.
2. Every month: your Quebec agent (or tenant) withholds Part XIII tax and remits it to CRA by the 15th of the following month.
3. By March 31: you receive your NR4 slip.
4. After year-end: file your Section 216 return (by June 30 if you had an NR6; within two years otherwise) to be taxed on net income and recover over-withholding. This produces your actual Canadian tax figure — federal tax plus the non-resident surtax, with no separate Quebec return for the rent.
5. On your US 1040: report the same rent on Schedule E in USD, then claim the actual Canadian tax paid as a Foreign Tax Credit on Form 1116. Then carry the rental income onto your Hawaii state return and claim the HRS §235-55 credit for the Canadian tax, which generally relieves most or all of the Hawaii tax on the same income.
6. Also file: FBAR (FinCEN 114) if your Canadian accounts crossed $10,000 USD, and Form 8938 if you meet its thresholds.
7. When you sell: the buyer holds back 25% (federal) plus 12.875% (Quebec) until the CRA issues a T2062 and Revenu Québec a TP-1097-V clearance; report the gain on both returns and credit the Canadian tax.

The theme throughout: Canada taxes first at the source, you reconcile down to tax on net income with the CRA alone, and the US credits whatever Canada actually kept — so the double-reporting nets out to a single, fair tax bill, with Quebec's provincial layer touching you only at the sale and Hawaii's state credit relieving most of the state-level tax.

Next Steps for Hawaii Landlords

• See our American landlords with Canadian property page for the software workflow that keeps one reconciled set of numbers feeding both returns.
• Read the full US citizen owning rental property in Canada guide for the complete obligation chain.
• Engage a cross-border CPA — ideally one comfortable with both Quebec/Revenu Québec and Hawaii's high-rate return — for your first-year Section 216 return, Form 1116 and Hawaii credit coordination, and the two-certificate process when you eventually sell.

This guide is educational, not tax advice. Cross-border tax is genuinely complicated and the details in your situation matter — work with a cross-border CPA for your actual filings.