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France
France
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UK
USA
USA
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Spain
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Ireland


Filing Deadline

USA Tax Deadline June 15th


USA Property Taxes Overview

U.S. Income Tax on Rent

A non-resident, who's only U.S. source income is derived from a rental property in the U.S. is subject to U.S. Income Tax which can be taxed in two different ways:

  • A standard flat rate withholding tax on the gross rental income of 30%. This must be withheld and paid by the letting agent or tenant of the property.

    You should request a Form 1042-S from the tenant or letting agent showing that they have withheld this tax from the rental income. If you choose this option, you will not have to file a U.S. tax return as your tax liability is satisfied by the withholding of tax.

  • Alternatively, you can opt to have your rental income taxed as "Effectively Connected Income" which is essentially business income. If you make this choice, you can claim all allowable business deductions attributable to the property such as: property expenses, mortgage interest and a depreciation allowance.

    The balance or "net" amount is then taxed at progressive graduated rates from 15-35%. This option is the sensible choice unless the income you generate is very low. (Note: the depreciation allowance will effectively be recaptured when you sell your property: see below).

In order to use the "effectively connected" method and to submit a tax return you must register for income tax with the IRS (see below).

Registration for Income Tax with IRS

US tax laws require each nonresident individual investor to obtain an Individual Taxpayer Identification Number ("ITIN") in order to file an Income Tax Return (Form 1040NR).

The standard process requires each investor to complete a Form W-7 and to provide a notarised copy of the picture page of their passport as evidence of their identification.

In order to complete this process the non-resident taxpayer must appoint an Acceptance Agent in the U.S. to facilitate the application process. Foreign Tax Returns Limited can provide this service and assist investors in obtaining their ITIN.


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