Do you live outside of the United States and thought about buying property in the USA? You can and we will explain the process and some tax issues to look out for.
Buying Real Estate as a Foreigner
If you’re buying property simply as an investment and that investment generated income, you will be subject to taxes in the United States at the state and federal level. In addition to this there will be United States tax liabilities that will arise when you dispose of the property and estate tax liabilities when you expire. Disposition tax and estate tax will affect both income producing property and property held as a residence.
The Liability Factor
In terms of how much you are going to be liable to pay to the United States will depend on where you are located outside of the country. Some countries have treaties with the United States and this can affect your liability. The minimum withholding is set at thirty percent of income that leaves the United States. There are ways to lower this, one of them being holding the property within a business structure.
Tax Credits Are Available
Depending on the country that you reside you may be able to take a tax credit for the tax paid to the United States for the property you hold. It is also very important that you understand the laws of your country in terms of holding property within a business structure. Some countries will penalize you more for one form of business over another. This can greatly affect the amount of income you ultimately get to keep after it is all said and done.