I'm a non-resident investor and will shortly be buying my first properties in the US (NC in particular).
I'm looking for someone that can advise me on the best setup from a tax and legal standpoint.
The plan is to buy & hold and I will be buying with cash. I may potentially may want take on some debt further down the road once I've built up a decent portfolio (ie. in 5+ years).
What is the best structure to set up at this point?
- From my understanding I'll be subject to the 30% tax withholding (on gross revenue) for NR aliens
- Is this offset by the end of the tax year when I pay taxes?
- If so, at what tax rate do I pay taxes - at the personal progressive income tax level that US citizens would pay or a different rate?
- Is there a way around the 30% withholding - I understand I can elect to pay at US personal income tax level if I can prove my business is "effectively connected with a US trade or business"?
- I understand estate taxes will come into play once I "pass on" my portfolio
- Can avoid the 30% tax witholding for NR aliens
- Possible double taxation when taking money out of the company through dividends/salary
- Shielded from estate taxes
I'd love to consult with someone that could talk me through the advantages and disadvantages of each and help me set up the appropriate structure given my situation.
Do you currently live in the United States? You may be deemed a non-resident for legal purposes but a resident for tax purposes.
If you are indeed a non-resident alien - you have the option of electing the income to be considered effectively connected income or to own the investment through a corporation.
There may still be withholding required on your income if there is effectively connected income depending on the structure that you use to invest in RE.
You may also be required to apply for an ITIN and file a US tax return.
You may also have to research if there is a tax treaty in place between the US and your country.
Investing through a corporation, while not preferred with appreciating property like real estate, can avoid you from having to file a US tax return.
You should consult with an advisor with specific details and to see which option is best for you.