Accountant for U.S. Real Estate Property Transactions to Foreigners

Selling property in the U.S. often features enough in the way of headaches and stress without adding tax treaties, exchange rates, and any number of the other complications to the mix; unfortunately, that’s exactly what you should expecting when selling property to a foreign person. Depending on their status and country of origin, the process could have significant tax implications for one or both parties involved, issues that are best addressed by an experienced professional specializing in international tax law and management advisory services.

The team of certified public accountants at U.S. Tax Help has the expertise to help you navigate the most convoluted transactions. Ted Kleinman, CPA, has more than 30 years’ experience in tax preparation and planning, and he and his staff are ready and willing to assist you anytime, anywhere. To schedule your first consultation, call us today at (541) 923-0903 or visit us online.

Definition of a ‘Foreign Person’ Under U.S. Tax Law

There are a variety of categories into which a person can fall, according to the Internal Revenue Service, each of which has its own requirements and tax implications. The broadest definition under which an individual from another country might fall is simply “foreign person,” a term the IRS uses to refer to non-resident aliens, foreign corporations, foreign estates, and any other person or organization based outside the United States.

Foreign persons may be given special tax considerations if they are married to a U.S. citizen or resident, though this primarily applies to the taxation of wages. Instead of being taxed at the standard non-resident alien rate of 30 percent, those individuals linked to a citizen or resident by marriage would be taxed at the same rate as that citizen or resident.

Resident aliens, however, are considered to be “U.S. persons” under tax law, the same classification given to American citizens. In order to qualify for the “resident alien” title, a person must pass either the green card test or the substantial presence test:

  • The green card test is simply a measure of whether U.S. Citizenship and Immigration Services has granted “lawful permanent resident” status, as indicated by the possession of an alien registration card (also known as a “green card”).
  • The substantial presence test requires a calculation based on days spent in the U.S. over the previous three years. To pass, you must a) be present in the U.S. for at least 31 days during the current calendar year, as well as b) a total of 183 days over the most recent three-year period, counting all days you were present during the current calendar year, 1/3 of the days of the previous year, and 1/6 of the days of the year before that.

Passing either of these tests qualifies a person for the same tax considerations as any U.S. citizen, a potential advantage when buying property.

Purchasing U.S. Property as a Foreign Individual

In many respects, a non-resident alien buying property in the U.S. will follow the same procedure as an American resident, though there are a few exceptions. One of these is that a non-resident alien likely does not qualify for a Social Security Number, which means they will have to apply for an Individual Taxpayer Identification Number, or ITIN (assuming they do not already have one). To do this, fill out Form W-7, Application for IRS Individual Taxpayer Identification Number, which is available on the IRS website. Make sure to include the proper documentation to verify your identity and status; a complete list of applicable documents is available online.

There are further complications involved in any international transaction that are not imposed by the IRS. These include the application of exchange rates and the clearance of large sums of money into the country (more than half of international property deals primarily use cash) as well as the negotiation of atypical sale agreements. Unless one or both parties have extensive experience with this type of transaction, it is likely that the deal will see more than a few delays as final details are settled and obstacles are cleared.

Additionally, the U.S. maintains a number of tax treaties with various countries, any of which could potentially have an impact on a purchase by a foreign person. These provisions can get complicated, however, and are best explored with the help of a qualified tax professional.

Tax Experts Specializing in International Real Estate Transactions and Planning

When looking for an accountant to guide you through a complex real estate transaction, your best option is to look for the team who specializes in international tax laws and their effects on real estate transactions; Ted Kleinman, CPA, is one such professional. He and the staff at U.S. Tax Help have decades of experience working in that very field. To learn how Ted and his team can guide you to the best possible conclusion of your deal, contact U.S. Tax Help today at (541) 923-0903 or visit us online to schedule a consultation.

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