Invest in USA Property
Pre-Purchase Investigations
How to Assess USA Residential Property Investment
The content on this page is reproduced with kind permission from Richard Lillycrop.When you are receiving rental income from your properties you will need a tax ID number from the Internal Revenue Service (IRS). USA citizens will already have a social security number, but for investors outside the USA you will need to be aware of the requirements which can be handled by INBIB as your appointed representative. Having a ITIN will save taxes being withheld by the property manager and it will allow you to make your annual tax returns. Also as you build up good credit, this number will be used when applying for loans and credit cards. Please note the following forms which INBIB's Accountancy services will guide you with. The US Tax year runs from January through December. Each property owner will file taxes with the US Government based on income and expenses. Each property will owe Property taxes to the county where the property is located. This tax is based on your property appraised tax value. You will also pay taxes to the county based on the value of your home furnishings.
The following is a brief overview of the forms you will need to prepare.
FORM W-7 Application for IRS Individual Taxpayer Identification number. A Non Resident Alien who has to file a USA Tax return and not eligible for a social security number. Each owner listed on the Deed of property need to have an ITIN number. This is the first tax form you should apply for.
TANGIBLE PERSONAL PROPERTY TAX return is requested by the county where your property is located. It is due April 1st and reports the furnishings in your rental home.
FORM W-8ECI Certificate of Foreign Persons Claim for Exemption from Withholding or Income Effectively Connected with the conduct of Trade or Business in the USA. The property owners are required to complete this form and give it to INBIB so that 30% of their income is NOT withheld and turned over to the United States Government. This form is valid for 3 years after the date it is filed. We request that you fill out this form when we first take you on as a client.
FORM 1042-S This form to be completed by INBIB to report the Gross Rent collected on your behalf. This form should be filled out for each owner of the property because it notifies the US Government that you have received Income from US sources. This form is required to be sent to you by March 15th.
FORM 1040 NR Your INBIB Property manager will send you a year end profit and Loss statement summarizing your P/L for the year. In addition, you may need to summarize any income or expenditure that did not run through INBIB. Keep these on a Spread Sheet.
FORM 1098 is sent to you by your US Mortgage comapny (if you have a mortgage) giving you the details of interest paid. Your accountant will require this. The year end statement shows details like interest,property taxes and homeowners insurance.
FORM 8288-B IMPORTANT If you ever decide to sell your property it is very important to file 8828-B with the US Treasury dept to request exemption or partial exemption from the automatic 10% withholding on the sales price of your home. Property owners are surprised to learn that when they sell their property the government holds 10% of the GROSS SALES PRICE unless FORM 8288-B has been properly and timely filled in prior to the sale of the property. If the form is not filed then you may claim it when you file your year end tax return.