ON IN­COME PRO­DUC­ING PROP­ERTY?

Finweek English Edition - - COVER STORY - Marc Ash­ton, Kelly Berold

Gen­er­ally, non- res­i­dent aliens are taxed at a flat 30% fed­eral tax rate on gross rental in­come, un­less they make a cer­tain in­come elec­tion on their re­turns. This elec­tion, which al­lows for de­duc­tions for reg­u­lar ex­penses be­fore in­come tax is cal­cu­lated, i s com­monly known as the ‘net elec­tion’. An in­vestor who is in­ter­ested in in­come properties should ask any po­ten­tial tax ad­viser (lawyer or ac­coun­tant) if the ad­viser knows about, and how to ex­er­cise, the ‘net elec­tion’. Fur t h e r, a ny­one who col l e c t s in­come for a non-res­i­dent alien and then pays that i ncome to a prop­erty owner is gen­er­ally re­quired to with­hold 30% of gross US source in­come (such as rent). No with­hold­ing is re­quired if the for­eign per­son has a green card, meets the phys­i­cal or sub­stan­tial pres­ence test, or if there is a treaty ad­dress­ing this is­sue be­tween the US and that per­son’s home coun­try. prices of lux­ury goods and lux­ury homes con­tinue to cap­ture head­lines and in­trigue the buy­ing pub­lic around the world. For­eign buy­ers are in­vest­ing in high-end real es­tate in record num­bers in cities such as Lon­don, Paris, New York, Hong Kong and Toronto.”

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