Foreign Ownership of U.S. Property

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We had a fantastic response to our webinar for real estate investors, Avoid These 5 Mistakes That Will Blow Up Your Real Estate Deductions. It will be available at this link for the next couple of weeks, along with the special offer of our Real Estate Accountant in a Box program. There were so many listeners with so many questions that we couldn’t fit everyone in, even after spending an extra 20 minutes online! So, this week we’re dealing with the questions that didn’t get answered

Today we’re looking at the question, Can Non-U.S. Residents Buy U.S. Real Estate?

The answer is absolutely yes you can. The U.S. does not restrict who can and can’t own real estate. But you need to understand how U.S. taxation will impact you before you push the button.

If you are picking up property to generate income, that income will be taxed in the United States, at the federal level and also at the state level (if the state where you buy property has an income tax). Plus, whether it’s an income-producing property or a residence for your personal use, there will also be tax issues when you sell the property and estate tax considerations when you pass on.

The exact amount you’ll pay in income tax depends on where you are from and whether or not your country has a tax treaty with the United States. The U.S. sets an initial 30% withholding on income leaving the country, unless you make some moves to voluntarily come into the U.S. system, and file a U.S. tax return. That can lower your tax bill considerably. It’s also a good idea to consider using a business structure to hold the property, as that can help with your tax bill, too.

Whether or not you can take a tax credit in your home country against the taxes you pay to the United States depends on your own tax laws. You’ll also want to check in with your home country on the impact of a business structure. For example, Canadians buying income-producing real estate in the U.S. should not hold it in an LLC, because of how Canada will treat that income. By the time you get through paying all of the taxes, there won’t be much left. Same goes with using a Canadian ULC (unlimited liability company) – again, it will kick up your tax bill.

There are many people from around the world looking at the U.S. real estate market right now. Our system allows for foreign ownership in multiple forms, directly, through a U.S. entity or through a foreign entity. But if you want to minimize the taxes you pay, take a little time to explore what will work best for you.

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