Discussion:Tax Consequence of a Foreign Individual purchasing real estate in the United States? If none, what are they for selling real property at a gain?
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Discussion Forum Index --> Advanced Tax Questions --> Tax Consequence of a Foreign Individual purchasing real estate in the United States? If none, what are they for selling real property at a gain?
Discussion Forum Index --> Tax Questions --> Tax Consequence of a Foreign Individual purchasing real estate in the United States? If none, what are they for selling real property at a gain?
| 22 March 2008 | |
| There are two types of U.S. taxes to consider when a foreign individual purchases U.S. real estate -- income taxes and estate taxes. For income taxes, you will owe U.S. income tax on the gain and on any rental income the property generates. Also, there are special withholding rules when the property is sold. This withholding is intended to assure that the U.S. tax is paid.
Estate taxes can be a trap for the unwary. U.S. real estate is subject to U.S. estate tax and the exemption for foreign individuals is only $60,000. Thus, if you buy property worth $560,000 and you die while owning the property (and its FMV remains the same), you will owe U.S. estate tax on $500,000. The estate taxes go up quite quickly with the highest rate around 45%. Thus, you could owe quite a bit of estate taxes. There are various ways to avoid the estate tax (some more exotic than others), but but these alternatives may have their own deficiencies. | |
