U.S. Real Estate Owned by Foreign Investors
Foreign investors in U.S. real estate face a filing regime that is different from both domestic real estate taxation and ordinary international reporting. Rental income, withholding, sale-year reporting, ownership structure, and estate tax exposure all need to be reviewed through a nonresident lens from the beginning. The situations we most often handle are foreign nationals with U.S. rental property, foreign sellers subject to FIRPTA, and U.S. real estate partnerships with nonresident partners.
Beyond the tax filings, owning U.S. real estate from abroad requires infrastructure that most foreign investors do not have in place. We help clients get set up and stay compliant on the operational side as well:
- LLC formation and annual renewal
- U.S. mailing address
- U.S. bank account setup
- Ongoing bookkeeping so the numbers behind the return are clean year-round rather than reconstructed at filing time
Foreign-Owned U.S. Rental Property
This is the most common cross-border real estate issue we handle. Foreign owners of U.S. rental property are often taxed more harshly than necessary. The default U.S. tax rules for nonresidents apply withholding to gross rent before any expenses are considered. Getting the filing structure right from the start means the owner is taxed on actual net income instead.
Annual filings typically include:
- Form 1040-NR
- State nonresident returns where required
- ITIN application support if needed
- Rental income and expense tracking
- Net income election review and maintenance
- Withholding coordination where applicable
U.S. Partnerships with Nonresident Partners
A U.S. real estate partnership with foreign partners carries its own withholding obligation. The partnership must withhold on each foreign partner’s share of rental or gain income whether or not any cash is actually distributed. Partnership compliance and the foreign partner’s individual filing have to be handled together.
Filings typically include:
- Form 1065 partnership return
- Form 1040-NR for each foreign partner
- Form 8804 and 8805 for withholding reporting
- Form 8813 quarterly withholding payments
FIRPTA Withholdings on Sale
When a foreign person sells U.S. real estate, FIRPTA withholdings require the buyer to remit 15 percent of the gross sales price at closing. That amount is based on proceeds, not gain. It can far exceed the actual tax owed. A withholding certificate application can reduce or eliminate it, but it generally needs to be in motion before or at closing.
The sale-year filing typically includes:
- Form 8288 and 8288-A for FIRPTA withholdings remitted at closing
- Form 1040-NR
- Gain reporting
- Depreciation recapture review
- State returns where required
- Credit for FIRPTA withholdings already remitted
Who This Is For
This page is for foreign nationals who own, rent, or are selling U.S. property, foreign investors using U.S. entities or partnerships to hold real estate, and U.S. partnerships with nonresident partners. For domestic real estate matters such as REPS, short-term rentals, domestic partnerships, cost segregation, and 1031 exchanges, see the real estate page under Business Tax.