Foreign Investors And U.S. Tax Implications

U.S. TAX IMPLICATIONS FOR FOREIGN INVESTORS

Southwest Florida attracts buyers, sellers and investors from all over the world. This is especially true on Sanibel and Captiva islands. many non-Americans buy homes or condos in Southwest Florida, inhabit them for a few months a year and then rent them out when possible.

There are important tax implications for foreign investors. We advise that an American accountant or tax attorney be consulted prior to any purchase. U.S. tax must be paid on rental income from real property or any gain from the sale of real property. In most cases it does not matter whether the U.S. has an income treaty with the home country of the foreign investor.

Non resident aliens are also subject to U.S. estate and Gift tax rules that are different from those applied to U.S. citizens. For instance, the U.S. real property of a non-resident alien who dies while holding title in his or her name or with someone else is subject to U.S. estate tax.

The federal Estate tax provides for an exemption of only $60,000 for a non-resident alien compared to $600,000 for a U.S. citizen. A marital deduction is only available if the surviving spouse is a U.S. citizen or if the property is transferred to a qualified domestic trust. If the real property was held in the name of the foreign investor who was a non-resident alien, a court probate proceeding may be required to conver legal title from the estate.