Rental income in the U.S.? How to navigate U.S. tax laws as a foreigner

In general you are taxed at 30% of your rental income and the person collecting the rent (you or a property manager) must submit this directly to the IRS at the time it is collected. However, there is a very common exception to this general rule which allows you to avoid the 30% withholding. The effectively connected income (ECI) selection allows a foreign investor to keep all of the rental income provided they file a U.S. tax return each year. If you are a non citizen and do not have a Green Card you would have to obtain an ITIN number  and file a Form 1040-NR, U.S. Nonresident Alien Income Tax Return or, 

Form 1040-NR-EZ, U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents, if qualified. Refer to the Instructions for Form 1040NR-EZ to determine if you qualify.

With this ITIN number you would list all of your rental income at the end of the year on a U.S. tax return. The beneficial part here is that you can now deduct all of the expenses associated with the rental unit. This includes: mortgage interest, HOA fees, cleaning fees, maintenance fees, property management fees, landscaping etc. In many cases this will drastically reduce your tax liabilities and allow you to collect rental income with no or almost no taxes.

Legal Disclaimer: For informational purposes only. Information here does not constitute legal advice. Contact our office for specific information regarding your case.

Written by A. Thorlton

Alexander was born and raised in Germany. As a dual citizen, he completed his legal education in the U.S., earning his juris doctor cum laude from Florida International University. He is licensed to practice in Florida and D.C.

As a real estate investor himself, Alexander advises foreign nationals in Real Estate and Immigration Law.

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At his best, man is the noblest of all animals; separated from law and justice he is the worst. — Aristotle