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Foreign Investment in U.S. Real Estate Tax Center
For non-U.S. buyers, owners and sellers of U.S. property: how rental income is taxed and reported, when a U.S. return is required, how FIRPTA withholding works on a sale and how to recover excess withholding, and how ownership through an LLC or corporation changes the filings.
Key questions
- Does a foreign person owning U.S. rental property need a U.S. tax return?Usually, a nonresident individual with U.S. rental property must evaluate Form 1040-NR filing and rental withholding. Rent not effectively connected with a U.S. trade or business is generally taxed at 30% of gross income unless a treaty changes the rate. A qualifying election can instead allow net rental income to be taxed at graduated rates, with a return required.
- What happens when a foreign person sells U.S. real estate?Usually, a foreign seller must report the taxable disposition of U.S. real estate, and the buyer must address FIRPTA withholding. The general withholding rate is 15% of the amount realized, not 15% of the profit, although exceptions and reduced withholding can apply. Withholding is a credit toward the seller’s final tax, not necessarily the final tax itself.
- Does owning U.S. property through an LLC change a foreign owner's U.S. taxes?It depends: an LLC’s federal tax classification, not its name, determines how income and filings are handled. A single-member LLC that is disregarded usually leaves rental income and sale gain taxable to its owner. Partnership or corporate classification changes the analysis, and a foreign-owned domestic disregarded LLC may have separate Form 5472 obligations.
Forms to know
Terms explained
In-depth articles
Foreign Investors Buying U.S. Real Estate: U.S. Taxes, FIRPTA & LLC Structuring
Selling U.S. Property as a Foreign Owner: How to Reduce or Recover FIRPTA Withholding
Foreign Owner Renting Out a U.S. Property: 30% Withholding or the Net Basis Election?
U.S. Estate Tax for Non-U.S. Owners of U.S. Property, Stocks and Companies
Tax cases
How Chirino USA can help
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