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Non-Residents Buying US Real Property

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Non-Residents Buying US Real Property


The United States is a desirable destination for many individuals around the world, attracting not only tourists and students but also investors looking to purchase real property. Non-Residents often wonder whether they are eligible to buy real estate in the USA and what implications this decision might have on their taxes and legal status. In this article, we will delve into the facts surrounding Non-Residents’ ability to buy property in the USA and examine the associated tax considerations.

Understanding Ownership Eligibility

Non-Residents can indeed buy property in the United States, but the process and eligibility criteria might differ from those applicable to US citizens or permanent residents. Ownership laws vary from state to state, so it’s essential to understand the rules of the specific state where you intend to purchase the property. While Non-Residents can purchase various types of properties, including residential and commercial real estate, they might be subject to certain restrictions or additional requirements depending on their immigration status. For example, some states have no restrictions on property ownership by non-resident aliens, while others impose limitations on the types of properties or the size of land that can be owned.

Factors to Consider

  • Immigration Status: Non-resident aliens, who do not have legal permanent resident status, might encounter more stringent regulations or face limitations on the number of days they can spend in the country.
  • Financing Options: Some lenders may require higher down payments and interest rates, while others might offer specialized financing options for foreign buyers.
  • Tax Implications: Non-Residents need to understand both federal and state tax laws, including property taxes, income taxes on rental income, and potential withholding requirements upon selling the property.

Tax Implications for Non-US Citizen Property Owners

  • Property Taxes: Property taxes are imposed at the local level by counties or municipalities and are usually based on the assessed value of the property. Non-Residents who own property are generally subject to the same property tax rates as US citizens.
  • 30% Withholding Tax: If you plan to rent out the property, you’ll need to understand the tax implications. The US requires non-resident aliens to report rental income earned from US properties, and taxes are withheld on gross rental income at a rate of 30%.
  • Reduce Tax – Section 871(d) election: A Section 871(d) election allows non-resident aliens who own income-generating property in the US to treat the property’s income as effectively connected with a US trade or business, enabling them to claim deductions and be taxed on only the net income instead of 30% tax on the gross income.
  • Capital Gains Tax: When selling the property, Non-Residents might be subject to capital gains tax, which is a tax on the profit made from the sale. The rate could vary based on factors such as the length of ownership and the seller’s tax status.
  • FIRPTA: The Foreign Investment in Real Property Tax Act (FIRPTA) requires buyers to withhold a portion of the sale price (usually 15%) when purchasing US property from a non-resident alien. This amount is remitted to the IRS to ensure compliance with potential tax obligations.

Contact Us Today

Luckily, our team of experienced professionals specialize in international real estate tax implications. By contacting us, you can navigate the legal landscape, make informed decisions, and avoid potential tax pitfalls while enjoying the benefits of property ownership in the United States. Whether you need help with general advisory, tax filings, tax planning before sale, or strategies for your rental properties, we’ve got you covered. Simply reach out to us below and we will be glad to assist.

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