Election for NR related to US Real Property

If you’re a non-resident (NR) individual or business owner who owns real property in the United States, navigating the complexities of the US tax system can be challenging. But don’t worry! Our specialized tax accounting services are here to help you save time, reduce your tax liabilities, and ensure compliance.

As a non-resident with real property located in the US, you may qualify to make an election under the Internal Revenue Code Section 871(d), allowing you to optimize your tax position and minimize your tax liabilities.

Under Section 871(d), NR individuals or entities can choose to be treated as US taxpayers for income derived from US sources that are effectively connected with their US trade or business. By making this election, you can avoid paying the standard flat tax rate of 30% on gross income from your real property. Instead, you have the option to pay taxes on the net income earned from the property.

To make a Section 871(d) election, it is necessary to attach a statement to your tax return for the effective tax year. This election statement needs to clearly mention the following:

1. You are an NR making such an election
2. Whether the choice is under Internal Revenue Code section 871(d) (explained above) or a tax treaty
3. A complete list of all NR’s real properties including:
   • The location of each real property
   • A description of any major capital improvements to any such property
   • The dates the NR owned the property
   • The income generated from any such property
4. The tax year in which the election is intended to be effective

This election remains in effect for all later tax years unless the NR chooses to revoke it. It’s important to be aware that opting for this election may subject you to US state income taxes. Additionally, you will be required to file a US tax return annually and make quarterly estimated tax payments.

Determining the most appropriate taxation election for your specific situation can be complex. That’s why seeking professional advice is crucial. Our team of qualified tax professionals is here to assist you in evaluating your circumstances and guiding you toward the most advantageous taxation election.

Don’t miss out on the opportunity to optimize your tax position as a non-resident with real property interests in the US. If you need help with any of these steps, please contact us and we can get to work for you – we serve all 50 states & international, so just let us know how we can serve you.