If you’re a Canadian who owns a Florida condo, a US brokerage account, or shares in an American company, a 2025 law passed in Washington quietly reshaped your exposure to US estate tax for Canadians in 2026 and beyond. The One Big Beautiful Bill Act (OBBBA) made permanent a much larger US estate tax exemption, and that change flows directly into the Canada-US tax treaty formula determining how much of it you can use. For cross-border families, that’s welcome news, but it doesn’t eliminate the filing traps, the double-taxation risk, or the planning work that still needs to happen before, not after, a death occurs.

The Permanent $15 Million Exemption

Under the old rules, the generous US estate tax exemption introduced by the 2017 Tax Cuts and Jobs Act was scheduled to roughly halve at the end of 2025. The OBBBA cancelled that “sunset.” For descendants dying in 2026, the IRS has confirmed a basic exclusion amount of $15,000,000, up from $13,990,000 in 2025, and it’s now indexed for inflation on a permanent basis rather than facing another cliff.

That figure matters to Canadians because of how the Canada-US tax treaty works. Non-resident Canadians don’t get the full US citizen exemption outright, but Article XXIX-B lets you claim a pro-rated share of it, calculated as your US-situs assets divided by your worldwide estate, multiplied by the full unified credit. A bigger numerator on the US side of that formula means more Canadian estates can shelter their US property from tax entirely, even when the estate includes a meaningful US real estate or investment portfolio.

The $60,000 Filing Trap Snowbirds Miss

Here’s the catch that trips up otherwise well-prepared clients: the filing threshold for non-resident aliens hasn’t moved in decades. If your US-situs assets, real estate, directly held US-listed stocks, and certain other property, exceed just $60,000 at death, your estate generally must file IRS Form 706-NA, even if the treaty credit reduces the tax owing to zero. That figure is not inflation-adjusted, so a couple with a modest Arizona vacation property and a US brokerage account can easily cross it without realizing a filing obligation now exists.

Missing that filing isn’t a paperwork footnote. Executors who don’t know to look for US-situs property, or who assume Canada’s lack of estate tax means this doesn’t apply, can expose an estate to penalties years later, often discovered only when a US title company asks for a tax clearance before releasing the asset.

US Estate Tax for Canadians: How the Treaty Credit Works

The pro-rata unified credit calculation looks straightforward on paper: take the full US exclusion, multiply by the ratio of US-situs assets to the worldwide estate, and that’s your available credit. In practice, valuing the “worldwide estate” correctly, converting values to US dollars at the right exchange rate, and properly classifying which assets count as US-situs are where returns get complicated. US real property, tangible personal property located in the US, and shares of US corporations generally count; most US-dollar bank deposits and certain Canadian mutual funds holding US securities generally do not, but the rules have exceptions worth confirming asset by asset.

A separate marital credit is also available for transfers to a surviving Canadian-resident spouse, effectively doubling the exposure threshold for married couples when structured correctly, typically through a qualified domestic trust.

When Canadian and US Tax Both Apply

Canada doesn’t have an estate tax, but it does have something that can feel just as painful: the deemed disposition rule, which treats a deceased person’s capital property as sold at fair market value immediately before death, triggering capital gains tax on the terminal return. This is where US estate tax for Canadians gets painful: a Canadian resident’s US-situs property can be hit twice, once by capital gains tax on the deemed disposition, and once by US estate tax on the same value.

The Canada-US treaty is designed to prevent full double taxation, generally by allowing the US estate tax paid to be claimed as a foreign tax credit against the Canadian tax owing on the same property in the year of death. The mechanics require careful coordination between the executor’s Canadian and US advisors, and the credit doesn’t always offset the full amount, particularly when currency movements or valuation timing differ between the two returns.

Planning Strategies Worth a Conversation Now

None of this planning works well when it’s started after someone has passed away. Clients who own US real estate, especially in Florida, Arizona, or California, or who hold concentrated US stock positions directly rather than through a Canadian mutual fund or ETF wrapper, should have their exposure calculated under the current 2026 thresholds rather than assumptions from a few years ago.

Common strategies include restructuring US real estate ownership, using life insurance to fund an anticipated liability rather than forcing a sale of the property, considering non-recourse financing that reduces the US-situs value counted for estate tax purposes, and, for larger estates, exploring trust or corporate structures before a purchase is made rather than after. Cross-border wills and coordinated powers of attorney also matter more than people expect, since a Canadian will that doesn’t account for US probate can slow an already stressful process for a grieving family.

The permanent, larger exemption is genuinely good news for most Canadian snowbirds and cross-border families, but “most” isn’t “all,” and the filing obligations haven’t gone anywhere. If you own US property, hold US securities directly, or split time between Canada and the United States, it’s worth a proper review of where your estate actually stands under the current rules.

If you’d like to talk through how US estate tax for Canadians affects your specific situation, our Woodbridge, Ontario practice works with cross-border and departure tax clients throughout the GTA and can help you map out a plan.