5 Common Questions About Taxes and Fees When Buying Real Estate in the United States
What is the purpose of the property? In the United States, the ultimate use of the real estate will have a significant impact on the tax treatment. For example, is the property a second home, a rental property, or both? If the property is a rental property, a U.S. tax return may be required to report the income and deductions of the property. But what if it is rented for only a few days throughout the year? The Internal Revenue Service has specific guidelines on dual-purpose (rental and personal) properties and their income tax treatment. You can consult and communicate separately.
How often can you go to the United States? Like most countries, the United States has special tax treatments for its residents. If you actually live in the United States and are considered a resident for tax purposes, you will need to report and pay U.S. taxes on your global income for the calendar year. Suppose you have not obtained a green card or U.S. citizenship, and the time you spend in the United States at least is considered as a U.S. resident.
Do I have to pay taxes in the United States? At least, you will need to pay property taxes for the real estate. Tax rates vary by state, and sometimes your residency status can affect your tax rate, but it is well known that Louisiana, Hawaii, and Alabama have the lowest property tax rates, while New Jersey, New Hampshire, and Texas have the highest rates! Whether you are required to pay U.S. taxes for other reasons depends on the use of the property. If you use the property as a rental property for at least 14 days in the calendar year, you may need to file a U.S. tax return (and possibly a state return!) to report the income and expenses related to the property. Standard deductible rental expenses include depreciation, mortgage interest, property taxes, utilities, etc. If the property you own is for personal use only and you are not considered a U.S. tax resident for tax purposes, you do not need to file and pay U.S. income tax due to the ownership of the property.
Should I purchase the real estate in my personal name or in the name of a company? The answer to this question depends on the use of the property. If it is used as a rental property, it is best to purchase the property through a separate entity company to minimize personal liability. However, establishing a separate entity company (LLC, partnership, etc.) may require additional federal and state tax filing requirements. In addition, companies usually pay different tax rates and other types of income taxes, such as alternative minimum tax, accumulated income tax, and personal holding company tax.
How to apply for a loan to purchase real estate in the United States? Although purchasing real estate with cash may be the simplest method, it is not recommended to buy it in full. In the United States, the vast majority of real estate is purchased through mortgages. Mortgage rates in the United States are relatively low, and lenders are usually proficient in the legal transfer process of ownership. But is it easy for foreign residents to obtain a U.S. mortgage? Some lenders can provide loans to foreign buyers. The key point of financing for U.S. home purchases with U.S. lenders is to choose professionals, including: real estate agents, lawyers, and tax advisors. There are reasons why buying real estate in the United States is becoming more and more popular – low market interest rates, low mortgage rates, very high rental returns, and market stability. For whatever reason, you should consider purchasing property in the United States, but only with proper planning and the assistance of professionals!
