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Questions and Answers

As a Non-U.S. Resident investor, you will be responsible for filling and paying taxes on the income connected with your business in the U.S. Although the rental property you own is a residence, it is considered a place of business for tax purposes; income reporting, licensing and regulations are required. Below are commonly asked questions regarding the tax implications of owning a rental property or business in the U.S.
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An ITIN (Individual Taxpayer Identification Number) is a nine-digit number issued by the U.S. Internal Revenue Service (IRS) to individuals who are required to file the U.S. tax returns. A tax professional must include the completed Form W-7, your original tax return for which the ITIN is needed and notarized copies of documents verifying the applicant.

An ITIN is required for the application of a Florida state Hotel License, State Sales Tax and a Business Tax Receipt (formerly Occupational License). These licenses allow you to operate your property as a short term rental dwelling.

  • 1040 NR U.S Federal Tax Return due June 15th (Annually) – Income tax on earned income after deductions. Prepared and filed by a Tax Professional

  • FL DR 405 Tangible Property Tax Return due April 1st (Annually) – An ad valorem tax on the contents in the investment home. Prepared and filed by Management Company or or Tax Professional

  • FL DR015 Sales Tax Return due 20th (Monthly) Sales Tax on bookings. Prepared by Management Company or Property Owner

Ad Valorem taxes on real property are collected by the Tax Collector on an annual basis, beginning on November 1st for the year January through December. The gross amount is due by March 31st. Tangible personal property tax is an ad valorem tax assessed against the furniture, fixtures, and equipment located in businesses and rental property.

Tax statements for real and personal property are mailed to your last known mailing address on November 1st of each year with payment due by March 31st. There is an exemption on the first $25,000 on the value of your tangible personal property. If the value of your personal contents are under $25,000, you will be exempt from filing a tangible property tax return. However, to qualify for the exemption, you must file the first year. Discounts apply for early payment.

All expenses involving the management of the property (management fees, advertising, maintenance, supplies, utilities, and license fees). In addition, homeowner’s insurance, property taxes, travel expenses and home association dues are also deductible. Interest on the mortgage loan is also tax deductible.

You may file for a 6-month extension by using Form 4868. Filing an extension does not extend the time to pay your tax. If you owe federal taxes, you must include the amount of the Form 4868 to avoid penalties.

Foreign nationals are taxed at the same rate as U.S. residents. The tax rate is usually between 10-30%, depending on the income earned. However, taxes are seldom owed due to the expenses that offset the income.

The Form 1042s is a form issued to all homeowners that received income from the management company. A copy of this form is sent to the IRS. Once you receive this form, forward the form to your tax accountant so they can file your tax return. Using this information provided by the management company.

Form 1098 is the mortgage interest statement provided to you by the lending institution carrying your mortgage loan. The interest paid is tax deductible. Some Form 1098’s include the homeowner’s insurance and property taxes if they are being escrowed.

Depreciation is a deduction that allows you to write off the cost of your investment in the income-producing property. The depreciation is the computed by dividing the cost by the number of years of its class life. The class life of residential real estate is 27.5 years. The class life of rental furniture is 7.5 years.

When you sell your investment home, the title company where the closing has taken place will withhold 10% of the sales price as an estimate of the income taxes. Once the tax liability has been determined, the IRS will instruct the title company how to distribute the amount withheld. A certificate of exemption (or reduce withholdings) may be applied for and submit a copy to the title company prior to closing.

Gains are taxed according to the amount realized after the sale, minus prior year carry-over losses, improvements and expenses to sell (and purchase). If the property was depreciated, the depreciation costs must be captured and added back to the sales price.

Due to the fact that the IRS receives a copy of the income you received (Form 1042S), they are requiring you to pay taxes on the earned income since it was earned in the U.S. However, the IRS also allows you to offset the income with the operating expenses so that the tax liability is either reduced partially or completely. If you file tax return in your country, you would include the U.S. tax return in your filling to show losses in the business connected with the U.S.