Foreign investors are purchasing more and more U.S. real estate than ever before.
Whether it’s to be used for a part-time residence, investment purposes, or to start/expand a business in the United States, there has been an increasingly evident surge in non-resident purchases. With prices of U.S. real estate well below market value, the potential high volatility is extremely attractive to individuals looking for a new home or additional ways to increase revenue.
Tax laws for non-residents purchasing U.S. real estate are slightly different than the laws that govern U.S. residents. Real estate income can be taxed in multiple ways depending on whether the non-resident is “engaged in a U.S. trade or business.”
One example of this is that owning a rental property where a lessee pays rent, taxes, operating expense, repairs, and interest in principal, is taxed at a flat 30 percent withholding on the gross income as opposed to the “net rent” received.
On the other hand, if a foreign investor is engaged in a U.S. business such as developing, managing, and operating a major business, the rental income will not be subject to withholding and will be taxed at ordinary rates. All expenses such as taxes, mortgage interest, maintenance, repairs and depreciation may be deducted to determine the taxable income.
The knowledgeable staff at Expatriate Tax Online is able to ensure you are current and maintain compliance by filing all specific forms and statements. Contact us today to make sure no costly mistakes are made.