Us Real Estate Investment Income

[Royspurs]

No doubt, like many who read TV, I am planning for my retirement in LOS and I was wondering if anyone knows how the IRS taxes income from rental homes in the US when you live in Thailand and are not a US citizen.

My situation is, I am an Australian citizen currently living in the US, I have three houses here (Houston) that I own outright, the income from these (about $50k after expenses) will form a part of my retirement income. I am currently on a green card but will let that lapse once I leave the US, so I don’t think my worldwide income will be a factor (I will have income form the UK & Australia also).

Is anyone in the same situation as me? Or are there any US citizens, living in LOS, that can explain how real estate generated income is taxed when living OS?

Also, is there any advantage to forming a company in the US to hold the properties (there maybe another 1 or 2 added prior to my leaving)

Any help would be greatly appreciated. Thx

[kurtmartens]

You might want to speak to a tax professional Stateside and ensure you get the best and accurate advise. I can recommend one or two who specialize in tax issues for people living overseas if you PM me.

[craigt3365]

Have to second that. Get advise from a professional near you who deals with real estate and has knowledge about overseas implications.

[Pib]

These IRS links might help a little.

http://www.irs.gov/b...d=96477,00.html

http://www.irs.gov/pub/irs-pdf/p519.pdf

Edited March 5, 2012 by Pib

[JimGant]

I was wondering if anyone knows how the IRS taxes income from rental homes in the US when you live in Thailand and are not a US citizen.

Ah, you'll be the proud owner of "Income Effectively Connected With US Trade/Business." That's a major section on Form 1040NR (non-resident), even allowing you to attach the old familiar 1040 Schedule E to report your rental income -- after you've turned-in your green card.

No way to get those rental propeties off Uncle Sam's radar screen. And so easy to attach for back taxes, too. At least you won't have Texas state income taxes (although their property taxes more than make up for their lack of income tax -- as you've no doubt found out).

Tax treaties, however, *should* precude any double taxation on these rents. But Uncle's got 'first dibs' on taxation rights on rent income from US property. No wiggling out of that.

Sorry.

[elshaheen]

With homes being forclosed by bank in the U.S.

Buying one of them is not that expensive. $40,000.

[Naam]

With homes being forclosed by bank in the U.S.

Buying one of them is not that expensive. $40,000.

huts, not homes.

[Royspurs]

I was wondering if anyone knows how the IRS taxes income from rental homes in the US when you live in Thailand and are not a US citizen.

Ah, you'll be the proud owner of "Income Effectively Connected With US Trade/Business." That's a major section on Form 1040NR (non-resident), even allowing you to attach the old familiar 1040 Schedule E to report your rental income -- after you've turned-in your green card.

No way to get those rental propeties off Uncle Sam's radar screen. And so easy to attach for back taxes, too. At least you won't have Texas state income taxes (although their property taxes more than make up for their lack of income tax -- as you've no doubt found out).

Tax treaties, however, *should* precude any double taxation on these rents. But Uncle's got 'first dibs' on taxation rights on rent income from US property. No wiggling out of that.

Sorry.

Hi Jim,

Thanks for your feedback, but just to explain if I wasn't clear, I know there is no legal way of not paying the tax, my question was around how much tax and if a company owned the homes would that be taxed less than personally owned i.e. is there a smart way to set up to be tax effective.

[Royspurs]

With homes being forclosed by bank in the U.S.

Buying one of them is not that expensive. $40,000.

Hi Elshaheen,

Depends on the type tenant you want to attract, and the buggers are armed here, so I'm not in the $40k market

[Royspurs]

These IRS links might help a little.

http://www.irs.gov/b...d=96477,00.html

http://www.irs.gov/p...rs-pdf/p519.pdf

Thanks Pib

[craigt3365]

With homes being forclosed by bank in the U.S.

Buying one of them is not that expensive. $40,000.

huts, not homes.

Just like you can buy a home here for 700k Baht or less. Or the ones advertised in BKK on the billboard I saw the other day for 60M++ Baht! Unreal.

[JimGant]

if a company owned the homes would that be taxed less than personally owned i.e. is there a smart way to set up to be tax effective.

I doubt it. A pass-thru entity, like a Subchapter S corporation, can't have non-resident alien stockholders. Presumably the same for other similar entities. And even if they did allow, you'd probably be in the headlights of the "non resident alien flat 30% tax rate."

Check out doing your taxes with a 1040NR vs. what you've been doing with your 1040. It's the same tax rate schedule (although, not allowing a standard deduction). Can't be too far off what you've been paying so far -- and maybe even less, if less US income will now be incorporated, thus a lower marginal rate.

Anyway, not my prime area of expertise. As suggested, get an expert -- particularly as to what happens to these properties when you croak --- and thus how to grease the skids.

[Royspurs]

if a company owned the homes would that be taxed less than personally owned i.e. is there a smart way to set up to be tax effective.

I doubt it. A pass-thru entity, like a Subchapter S corporation, can't have non-resident alien stockholders. Presumably the same for other similar entities. And even if they did allow, you'd probably be in the headlights of the "non resident alien flat 30% tax rate."

Check out doing your taxes with a 1040NR vs. what you've been doing with your 1040. It's the same tax rate schedule (although, not allowing a standard deduction). Can't be too far off what you've been paying so far -- and maybe even less, if less US income will now be incorporated, thus a lower marginal rate.

Anyway, not my prime area of expertise. As suggested, get an expert -- particularly as to what happens to these properties when you croak --- and thus how to grease the skids.

You raise an interesting point about when I croak it (in about 50 years time....) they are in joint names, so I asume??? that my wife will have all selling rights? and my passing would be a good time for her to sell o avoid the State taking them, any insight for me?