US residents are taxed on their worldwide income similar to US citizens. Nonresident aliens are taxed only on their income from sources within the United States.

Depending on the type of income, they may need to submit a US tax return to declare it.

Owners of US property, who are classified as ‘nonresident aliens’ and who do not already hold a Social Security Number (SSN) must apply for a US ITIN number if they expect to receive US rent income or if they plan to sell the property in the current year.

Nonresident aliens must pass one of the following two tests before they can be classified as US residents for tax purposes:

  1. The Green Card test
  2. The substantial presence test for the calendar year (January 1-December 31)

If you are a nonresident with rental income, keep in mind that the IRS treats rental income just like regular taxable revenue and both residents and nonresidents must file a tax return to declare it and pay rental income tax.

When you file your income tax return in the US, remember to also include any other sources of revenue.

You can lower your tax bill by deducting certain expenses that qualify.

This deduction is one of the great benefits of owning rental property.

Keep in mind that even after these deductions, your rental income still counts as part of your total taxable earnings.

Our tax professionals can assist you in correctly declaring your rental income tax and in claiming all the applicable tax deductions depending on your circumstances.

usa property tax return

If you are a nonresident with rental income in the US, you need to know that your revenue that is subject to US income tax must be divided into two categories:

  • Income that is effectively connected with a trade or business in the US and
  • Income that is not effectively connected with a trade or business in the US

‘Effectively connected income’ is taxed at graduated rates with deductions allowed whereas income that is not effectively connected with a trade or business is taxed at a flat 30% rate. This tax is withheld at source.

In order to mitigate the 30% gross income withholding tax, nonresident landlords can make an election under IRC Section 871(D).

This relieves the income payer from the obligation to withhold the flat 30% tax on gross income. It allows the nonresident landlord to file an annual return and tax the rental income (net of expenses).

The election is made by attaching a formal election statement to tax return Form 1040NR.

usa property tax return service

US Tax Identification Number

The Internal Revenue Service (IRS) requires that all nonresidents with rental income must have an Individual Taxpayer Identification Number (ITIN) if they do not have a Social Security Number (SSN) for taxation purposes.

US Tax Identification Number

US Property Tax

US real estate taxes vary from state to state as each state has its own right to implement whatever rates it deems fair provided it does not interfere with the Federal Government.

Property tax is often imposed on the value of the property. US property taxes are based on the fair market value of the property.

US property tax rates have increased to mirror and exceed similar rates in other countries with some states exceeding 5%.

In some states, it is permissible to separate the real estate tax, into two taxes – one for the land value and one for the building value.

The majority of US homeowners must pay US property tax each month along with their mortgage.

If you completely pay off your loan, you’ll get a tax bill from the local government occasionally during the year.

Rental income tax

US Rental Property

Taxpayers can generally make an election to get deductions for rental property. Both residents and nonresidents must file a tax return in the US and pay rental income tax.

Capital Gains Tax

In the United States, individuals and corporations pay income tax on the net total of all their capital gains just as they do on other sorts of income, but the tax rate for individuals is lower on long-term capital gains, which are defined as gains on assets that had been held for over one year before being sold.

When a nonresident sells a property, the buyer retains 15% of the agreed sale price as a withholding tax which is paid over to the IRS to cover the sellers’ tax obligations.

A tax return should be filed with the IRS to determine if an overpayment has been made and if a tax refund is subsequently due.

Rental properties are subject to different capital tax rules compared to primary residences.

A rental property is treated differently than your main home for capital gains taxes. When you sell it, you might owe two types of taxes.

First, there’s a 25 % tax on the money you made from the depreciation you claimed earlier.

Second, you may owe either 0, 15, or 20% in long-term capital gains taxes based on your income and how you file your taxes.

If you’re thinking about selling a rental property you’ve had for less than a year, it’s a good idea to wait for at least 12 months.

If you don’t, your profit will be taxed like regular income, and there’s no upper limit for short-term capital gains taxes, which could be as high as 37%.

US Estate and Gift Taxation

US gift tax applies when the property is transferred as a gift to a family member, friend, or associate.

US estate tax may apply to somebody’s taxable estate at their death. The taxable estate is considered the gross estate less allowable deductions.

In 2023, there are some important changes in the rules for gift and estate taxes that you should be aware of:

  • The amount you can give each year without triggering gift taxes has gone up to $17,000 from $16,000.
  • The total amount you can give over your lifetime without paying gift or estate taxes has also increased to $12.92 million, up from $12.06 million.

Worldwide Income

Depending on your local country’s laws, if you are a nonresident with rental income, you will have to declare your US rental income both in the US and on your annual tax return in your home country.

However, double taxation agreements exist, to ensure that you will not be taxed twice on your income.

You can contact the PTI Returns team of property tax professionals for further details regarding double taxation relief and/or filing your resident tax return.

We can assist both US residents with rental property overseas who earn foreign rental income and nonresidents who have rental real estate in the US.

Our tax professionals will guide you through the process of preparing and filing all necessary US tax returns in addition to advising on your property tax obligations in your home country.

Rental income tax - online tax filing for rental property owners

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File tax return online

Property Tax International (also known as PTI Returns) provides a complete tax return service specifically tailored to nonresidents with rental property in the US. We can also assist US residents with property overseas.

All our US tax filing services are carried out in-house by our team of US tax professionals.

Your dedicated tax advisor will be your one point of contact throughout the return process and will communicate directly with the IRS when required.

Nonresident taxation in the US can be confusing which is why our US tax service has been specifically created to guide you through the service from beginning to end. We offer the following services:

  • US Filing of Personal Tax Returns
  • US Individual Taxpayer Identification Number (ITIN) Applications
  • US Withholding Tax Amendment Returns (Tax Rebate Returns)
  • US Capital Gains Tax Returns
  • Coordinating with your tax resident accountant
Rental income tax - online tax filing for rental property owners
usa tax return services

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FAQs

  • What additional purchase costs exist in the US?
  • Тhese are the costs you need to know about:
    • Title insurance – this is a contractual obligation that protects against losses that occur when the title to a property is not free and clear of defects (e.g. liens, encumbrances, and defects that were unknown when the title policy was issued). The terms of the policy define what risks are covered and what risks are excluded from coverage. The title insurer will reimburse you for losses that are covered, up to the face amount of the policy, and any related legal expenses. This protection is effective as of the issue date of the policy and covers defects arising prior to your ownership. Title companies issue policies on all types of real and personal property.
    • Broker commissions – real estate transactions that involve a broker are usually subject to a commission that typically varies between 3% and 6% of the property purchase price; however, oftentimes the commission is incurred by the seller.
  • Will I be treated as a nonresident alien or a resident alien?
  • Non-citizens in the US are classified as nonresident aliens and resident aliens. If someone is an alien (not a US citizen), they are considered a nonresident alien unless he/she meets one of the two tests:
    • Green card test – A person is a resident for tax purposes if they are a lawful permanent resident of the United States at any time during the calendar year. This is known as the “green card” test.
    • Substantial presence test – A person will be considered a US resident for tax purposes if he meets the substantial presence test for the calendar year. To meet this test, they must be physically present in the United States on at least 31 days during the current year, and 183 days during the 3-year period that includes the current year and the 2 years immediately before that.

     

  • How are resident aliens and nonresident aliens taxed on income derived from US-situated property?
  • Resident aliens generally are taxed on their worldwide income, the same as US citizens. They need to file an annual return and report the rental income received. Rental expenses are permitted to offset rental income, and the net rental income is taxed at graduated rates.

    Nonresidents who receive rental income from US-situated real property are generally taxed at 30% of the gross rental income. It is the tenant or the real estate management company (if there is one involved) that has a primary obligation to withhold the 30% tax before remitting the net amount to the nonresident landlord. A nonresident alien receiving rental income is not required to file an annual income tax return to report the rental income as the 30% tax withheld satisfies the US tax liability. However, the US tax law permits a nonresident alien to make a special election as explained in the following section.

     

  • Special election under IRC Section 871(d) to file an annual return:
  • In order to mitigate the 30% gross income withholding tax, the nonresident landlord is allowed to make an election under IRC Section 871(d) that relieves the income payor from the obligation to withhold 30% tax on gross income and at the same time allows the nonresident to file an annual return and tax the rental income on a net basis (net of expenses). This election is made by attaching a formal election statement to a timely filed tax return Form 1040NR.
  • What are the US income tax rates?
  • For those who elect to tax rental income on a net basis, the US income tax rates vary and are applied on a sliding scale. This means that people who earn more income pay a higher percentage of their income in taxes. There are seven federal income tax brackets with rates ranging from 10% to 37%. State tax may be required in addition to the federal rate depending on the rules imposed by the state where the property is located.
  • What can I deduct as expenses against my US rental income?
  • If you do make an election under Section 871(d) and elect to tax your rental income on a net basis as explained above, there are a number of allowable expenses that can be offset against your rental income such as:
    • Advertising
    • Auto and travel
    • Cleaning & maintenance
    • Insurance
    • Legal & professional fees
    • Management fees (letting agency fees)
    • Mortgage interests (exclude any capital element)
    • Repairs
    • Supplies
    • Property taxes
    • Utilities

     

  • When do I need to file my US tax return?
  • The deadline for filing a US income tax return is 15 April (or the next business day if the 15th falls on a federal holiday or a weekend). There is an automatic extension given to resident aliens and US citizens living abroad who have until 15 June to file their US income tax return. The deadline for nonresidents is 15 June.
  • Am I obliged to apply for a US tax number if I am treated as a nonresident alien?
  • Nonresident aliens must apply for an Individual Taxpayer Identification Number (ITIN). An ITIN is a tax processing number, issued by the Internal Revenue Service (IRS). It is a nine-digit number beginning with the number “9”. The ITIN is only available to individuals who are required to have a taxpayer identification number for tax purposes but who do not have and are not eligible to obtain a social security number from the Social Security Administration (SSA). Practically, a nonresident alien may obtain an ITIN only if they receive or expect to receive taxable income from US sources.

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Tax Rates and Deadlines

Tax Year
January – December
Income Tax Rate
10% to 37%
Income Tax Deadline
15 April (or the next business day if the 15th falls on a federal holiday or a weekend). There is an automatic extension given to residents aliens and US citizens living abroad – 15 June. For nonresidents – 15 June.
Capital Gains Tax Rate
The tax rate is specific depending on the circumstances.
Dual Tax Agreement with Ireland
Yes
Dual Tax Agreement with the UK
Yes

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USA Property Tax Return Services & Fees

Filing services are offered to nonresidents with a rental property in the US and US residents with a rental property overseas.

Save time and stress when filing your US income tax return. File with PTI Returns.

  • Rental Income Tax Return – €350
  • Additional property – €85
  • Additional owner – €150
  • Capital Gains tax returns

Multiple years discount – 10%.
This is available where returns for 2 or more tax years are required. This discount is applicable to the annual fees excluding any once-off fees and administrative fees and does not apply where other discounts/reductions have been granted.

Notes:

  1. All fees are inclusive of VAT.
  2. Prices are based on the provision of information in pre-agreed format – a surcharge of 20% may be applied for disorganized files.
  3. Prices are based on the provision of necessary backup documentation only – the inclusion of unnecessary documentation may result in the application of an additional charge.

Learn more about property income taxes in the USA.

Request a free callback from a tax professional

+353 1 635 3722

When you apply through this contact form:

  1. A tax specialist will contact you
  2. After specifying with you the services you need and the tax documents required, you will receive information regarding our final fees
  3. Before we can start work on your tax return, we will need you to share the necessary property information and tax documents with our team