The Questions For Foreign Buyers
Now that you have examined the reasons behind your purchase decision, gained some degree of the customary real estate practice, established a relationship with a currency exchange business, opened a bank account, found your ideal real estate professional and ready to start searching for properties… you should be all set... not quite yet, you may have more questions you would like us to answer.
What types of properties can a foreign national buy?
Foreign buyer has the same choice as anyone else residing in the US to buy any type of real estate except for Co-ops. This type of ownership is not popular in Florida.
Can I open a bank account without being a resident of the US?
You certainly can and you should have no problem doing so. You do not need to be a resident or a citizen to have a US bank account. Many foreign buyers chose large banks in their home country that have branches in the US to make it easier for them during funds transfer or even with opening an account.
Do I have to be present in the US to Close on my transaction?
The new owner DOES NOT need to be in the US. Rather, the new owner can provide his or her representative with “Power of Attorney” and the representative will have the right to close the deal on behalf of the new owner. This is quite common and convenient for buyers who doesn't want to come back to the US for the closing.
Do I pay a different property tax amount than that of a resident?
In Florida, there is no difference between a foreign national and a resident in regards to property taxes. They both pay the same amount if the property is not the primary residence. How is property tax calculated? For more information about property taxes in Florida, follow the link http://dor.myflorida.com/dor/property/taxpayers
How does Property insurance work for a foreign buyer?
Same as property taxes, there is no difference between the cost a resident pays and a foreign national. Property insurance is based on the property and its age.
Who should I consult with when buying a property? Tax Specialists
Because Foreign Buyer’s overall tax liability may be different than that of a US resident depending upon the buyer’s home country’s tax treaty with the US, we highly recommend that you best consult with a local tax advisor that is familiar with the tax treaty. For instance, the capital gains rate for US residents is 20% (if the property is owned for more than one year). Foreign Nationals, however, could be required to pay a higher rate, depending upon their home country’s tax treaty with the US and how they structure their purchase.
Can I defer Capital Gains Taxes?
Yes you can. The US government allows Foreign Sellers to use Section 1031exchange of the IRS Code to defer capital gains taxes. The rules are complex and one must not drift from the rules. Please consult with an attorney.
Am I required to “Elect” to pay Income Taxes on Net Rental Income?
The US government requires that the Foreign National “elect“ to pay US income taxes on any net income (rental revenues less expenses) derived from rental property. If this election is not made on a timely fashion (passed the deadline), a tax of 30% of the gross rental income will be assessed.
What is Foreign Investment in Real Estate Property Tax Act (FIRPTA)?
When a non-resident sells US property, the Internal Revenue Service wants to be sure they get paid capital gains taxes. Accordingly, the IRS withholds 10% of the gross purchase price of the property. When a US tax return is submitted reporting the capital gains tax, if there is any refund due that money will be refunded to the filer. There is a rule regarding the amount of the sale that applies. Please send us a note for more details.
What happen if I die, am I still liable for US Estate Tax?
When a Foreign Buyer dies, his or her estate will be taxed by the US government at close to 46%. This is easily avoided if the Foreign Buyer does some upfront planning. The planning involves setting up a Limited Liability Corporation (LLC) and a Foreign Corporation. The LLC would own the property, the Foreign Corporation would own the LLC, and the buyer would hold shares of stock in the Foreign Corporation. Under this scenario, since the property is “owned” by the Foreign Corporation, the US government would receive nothing upon the death of the Foreign Buyer. This is the most used strategy for Foreign Buyers and the less expensive.
Rules and regulations change frequently. Please consult with a local professional for the latest changes in policies or terms that may affect your buying decision.