Non-residents earning income in the United States need to file a US Non-Resident Income Tax Return and may be required pay US income tax. Koontz & Parkin, CPAs can help determine if you are subject to taxation. To be taxed as a non-resident, there are four conditions that may apply; the two most common are:
In addition, the U.S. has negotiated treaties with several countries to allow foreign citizens to stay longer than 90 days and earn more than $3,000. There are also exemptions for foreign residents who work in specific industries, such as workers in the maritime industry, politicians, diplomats, and students. If you do not meet the conditions listed above, and there is a tax treaty in place with your native country, you may not be subject to taxation. We will assist you with the process of avoiding unnecessary taxes.
Non-Resident and Foreign Investors
If you are not a U.S. resident, you can still invest in American real estate. Ideally, you should consult a certified public accountant familiar with foreign investment to discuss the advantages and disadvantages of your investment. One of the drawbacks to investing in American property as a non-U.S. resident is the withholding requirements you may face when you sell the property.
The Foreign Investment in Real Property Tax Act (FIRPTA) requires that 15 percent of the proceeds be withheld and paid to the United States Internal Revenue Service (IRS) as a deposit for income tax liability. This rule does not apply to property under $300,000 if the purchaser plans to use the property as a residence at least 50% of the time it is in use for two years following the purchase, and the purchaser is willing to sign an affidavit stating such. If the sale price of the property is between $300,000 and 1 million, then a similar affidavit may be signed to reduce the withholding rate to 10%. A seller may also apply for a withholding certificate, which reduces or eliminates the 15% withholding requirement.
There are a number of factors which could affect the outcome of renting, selling, or holding real estate in this country when the property is owned by a non-U.S. resident or business. For instance, where the owner lives, the value of the property, and how much income the property generates could influence the amount of income and estate tax due on the property. Because these circumstances vary so greatly, it is essential that any non-U.S. resident who is considering a real estate investment talk to a CPA or a tax lawyer. Because CPAs are familiar with U.S. tax laws, they can help you analyze your specific situation and determine the best way to take ownership and structure the transaction.
Jo Ann M. Koontz and Marina Parkin offer a powerful combination of in-depth knowledge of tax regulations, a firm grasp of the business world, and years of experience representing clients. To schedule a consultation, call the Sarasota office of Koontz & Parkin, CPAs at 941.328.3993.