Investing in US real estate has been a come on for foreigners in the past few years. With the current market conditions of low mortgage rates and affordable home prices, people from all over the world recognize the potential of owning a home in this country.

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TAX CONSIDERATIONS WHEN INVESTING IN US REAL ESTATE
February 11, 2013real estate investingforeign real estate investment, foreign real estate investors, investment in the US, property tax, real
estate, US real estateadmin
Investing in US real estate has been a come on for foreigners in the past few years.
With the current market conditions of low mortgage rates and affordable home
prices, people from all over the world recognize the potential of owning a home in
this country. In fact, the response had been so great that it held a major role in
keeping the housing market from total collapse.
The US government is strongly supporting these foreign investments. In fact, there are
bills passed that encourage other nationalities to invest in US soil. But like any
investment, you need to look into various issues to make sure that you understand
how your money will evolve and grow your profits.
One of the considerations in US real estate investment involves taxes. To help you make better judgements, here are some of
the important tax implications that you need to research on.
Any real estate purchase is assumed as an investment. Whether you plan to live in it or to profit from it should be carefully
defined. Foreign investors usually purchase US properties with the intention of profiting from it. That means, the purchase must be
defined as a trade or a business. The qualifications is to have a constant and regular flow of income from the said US real estate
property. This will define what kind of property tax you will have to pay for. If you bought realty with a domestic partner, you need
to define this to be able to access the recovery allowances and tax deductibles that is entitled to you because of the

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arrangement.
Another important research before you invest in US realty is Section 897 of the FIRPTA (Foreign Investment in Real Property Tax
Act). Before the enactment of this act, foreign real estate investors can escape taxes as long as they can meet requirements
like being in the country for 183 days or more. As long as the income was not fixed or regular, it can escape certain tax fees.
Even if the US real estate is sold by its foreign owner, it will not be subjected to income tax.
Section 897 defines that any gains from a real estate property owned by a foreigner will be considered an effectively
connected income or ECI. If a gain is considered as such, then it will be subjected to the corresponding tax obligations. Even if
it is a passive investment (not used to provide regular income from lease), it may still be subjected to taxes. That goes for
foreigners acting as sole investors or partnered with a domestic or foreign corporation. Bottom line is, the playing field of real
estate tax gains and losses have been leveled by Section 897.
Taxes seem like a difficult concept to grasp when you are interested in US real estate investing. However, it is a necessary
information that you have to understand when you want to make your money grow. You need to be aware of these tax
implications for you to be able to maximize the return of your investment.
If you wish to know more about US real estate investing, get in touch with Controlled Growth Investment. We are here to assist
and possibly partner with you in your efforts to invest in US properties.
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