Nonresident owners of US rental property

 

If you own property in the United States that you rent, either directly or through a management company, you may need to file a US tax return.

In general as a non-resident receiving rental income from a U.S. located property you do not have to file a return; However, the general rule requires your tenant to withhold 30% each rental payment an remit it to the IRS. In most situations this is not the most advantageous approach, and instead you may elect to file a return - Form 1040NR, and pay tax only on your net rental income - that is your gross income less all rent related expenses, such as property taxes, maintenance, mortgage interest, depreciation etc. This is known as net basis election allowable under IRC Section 871(d). The rules for making such an election are very strict as the election has to be made with a timely filed return and the failure to make the election may jeopardize your ability to claim expenses.

If you have recently acquired a rental property in the US, or if you have been renting such a property for many years, we can help you with your US tax compliance requirements. If your property is located I a state that imposes income tax, we will also assist you with your state tax filing requirements. If you do not have a U.S. Tax identification number such as an SSN or an ITIN, you may consider obtaining one. Our rental return services include the preparation of the following forms that may apply to your situation:

  • Form W-7
  • Form W8-ECI
  • Form 1040NR
  • Election statement under IRC Section 871(d)

 

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