Three Reasons Foreign Nationals Need Professional Title Services
Three Reasons Foreign Nationals Need Professional Title Services
South Florida remains one of the world’s leading international hubs for commerce, tourism, and investment. Foreign Nationals from across the globe are drawn to the region’s rich selection of prime real estate, which caters to everyone from seasonal home buyers to investors. Regardless of your aims in this dynamic market, you’ll find yourself facing significant challenges whether you’re buying, selling, or investing.
U.S. tax rules and regulations impose special restrictions and requirements on Foreign Nationals, making real estate transactions and transfers more costly and time consuming then they otherwise would be for legal citizens or residents. This makes it crucial to team up with a title company that specializes in title services for foreigners.
The following are just a few of the issues you will face in your U.S. real estate ventures as a foreign national.
Foreign Nationals are Subject to Certain U.S. Estate Tax Laws
Like many buyers, you may want to take title to your new property in your individual name. But assuming you don’t sell or transfer title before you pass away, you may be hit with an exceptionally heavy estate tax burden. For U.S. citizens and green card holders, approximately $5 million worth of assets is exempt from estate tax. By contrast, for foreign nationals, only the first $60,000 worth of assets avoids U.S. estate tax, with the remainder subject to tax rates that can be as high as forty-five percent. Such a high tax burden may prompt you to sell your property as soon as possible to turn a profit – but this may not be consistent with your intended use for the property. We can help you to structure your purchases properly to minimize your estate tax burden.
Foreign Nationals may be Hit with a Withholding Tax upon the Sale of their U.S. Property
Any nonresident or citizen planning to sell U.S. real estate should brace themselves for the Foreign Investment in Real Property Tax Act (FIRPTA). This law imposes a withholding of up to 15 percent of the sales price of a property that is sold by a foreign national. The closing agent or title company will be tasked with determining whether the seller is a foreign national and taking the necessary steps and procedures to withhold the required portion of the proceeds. Certain exceptions do apply to FIRPTA, and we can assist you with structuring your purchase and sale in a matter that will reduce the withholding amount or avoid FIRPTA all together.
Foreign Nationals Must Be Cautious About Rental Income
Rental properties can offer a considerable return on investment to real estate investors across the world. Property owners who file their income taxes in a timely fashion can choose what is known as a “net election”. This deducts items such as depreciation, mortgage interest, repairs, and other operational expenses so that that income tax applies only to net rental income. Fortunately, foreign nationals can also take advantage of this opportunity, although they must be especially careful to stay on top of their tax deadline: if foreign owners fail to file their income tax on time, they will not be able to take advantage of this cost-saving option, but they may be subjected to an income tax on gross rent without regard for deductible expenses.
These are just a few of the challenges facing foreign investors and buyers of Florida real estate. Not all title companies are equipped to advise or assist foreign nationals on the various issues and obstacles they will face in the real estate market. With a diverse and globally-oriented team based in cosmopolitan South Florida, Marina Title is uniquely geared to serve to the real estate needs of foreign nationals from all over the world. Our attorney-owned and operated team is familiar with foreign national laws, and can provide you with the sound advice and guidance to safeguard your interests.
To learn more, contact (305) 901-5628 or email [email protected].
