Features buying and real estate taxation in the US
1. U.S. Federal law allows foreigners to own real estate: buy it, transfer ownership, etc. of the Restrictions on ownership can arise in individual States, according to local laws. All property taxes are paid by owners of property or land in the district in which they are located.
2. The numerous and very serious requirements shown to foreign investors and persons selling property to foreign nationals. And the amount of tax documentation is quite large. The U.S. authorities are committed to maximum transparency, so all stages are clearly in control of the process. Delayed reporting and non-payment of taxes may result in the imposition of an administrative fine in the amount up to 25% of the market value of the property. And also to lead to deportation from the country and even imprisonment.
3. To own property in America can a few people.
This can be investors that are not members of the same family who own equal or different share ownership of the object. Only in the States, there are about 10 kinds of contracts of purchase and sale of real estate – and their flexible structure allows you to specify all the details of the future ownership of multiple investors.
4. Mortgage financing – real financing option for the purchase of property for foreigners in America. For a mortgage with a US Bank will require proof of stable job, an income statement, and documentary evidence of a favorable credit history.
5. At the time of the transaction of purchase and sale the parties can agree about which one is what taxes paid is allowed by law. But all the costs of housing search, registration, insurance, operation, title company and real estate Agency, the state fees are the responsibility of the buyer. The amount that must be added to the budget when buying a home, is at least 2%-5% of its value.
The main types of property taxes in the U.S.
The transfer tax (Transfer Tax) is payable at the time of the transaction, after the transfer of ownership documents. Generally, this type of tax is paid by the seller but by mutual agreement of the parties the amount may be divided between both parties in the transaction – or to be paid by the buyer. The amount of the transfer tax is calculated based on the appraised value of the "transferred" property – and different for different States. For example, in California it's as little as $0.55 per $500 of value of the property.
Real estate tax (Property Tax) depending on the County paid once or twice a year. The amount of the estate tax is calculated based on the appraised value of the property – and, as a rule, 1% -2%. Also, depending on the state, property owners pay annual and other local taxes, which are used to Finance schools, hospitals and other social infrastructure. The volume and amount of these taxes are approved by local authorities.
Tax on capital gains / income tax (Capital Gains Tax) payable by the owner in the sale of real estate. Its amount is based on the profit tax on capital gains is taxed the difference between the value of the object when buying and selling. In that case, if the object was owned 12 months or more, the rate on long term capital gains is 20%. In that case, if this period was less than 12 months, profit taxed at standard tax rates, the marginal rate is 39.6%.
This tax is not charged to the property owner in that case, if for sale, the object is its main and only shelter, and if it is sold for a lower price than for which it was purchased. Allowable income in the sale of $250 000 for one owner or up to $500,000 for the family.
Withholding tax (for foreign investors)
According to the "Act on foreign investment in the US real estate market", the foreigners in the sale of real estate must pay an additional tax, which is 10% of the sale price.
Taxation of rental
Rental income in the U.S. is taxed at the standard income tax marginal rate is 39.6 percent. Usually the rate on rental income is 30% of the amount of rent. But it can be reduced by writing off the costs of housing. How to do it, tell the realtor.
Innovations
Since 2013, increased the maximum tax rate on capital gains from 15% to 20%, as well as inheritance taxes and gift tax from 35% to 39.6%. This, of course, affects the property owners.
Three pieces of advice to investors
1. In every state, and sometimes, and in every U.S. city has its own taxes. Before the transaction is necessary to discuss with your realtor the main features of municipal taxation – and to identify any pitfalls that may arise before, during and after purchase.
2. For debt relief experts recommend making American property not on an individual but on an American company: Limited Liability Company (LLC) is the analogue of the Russian Limited Liability Company, trust or partnership organization. Each of them has its pros and cons, and professionals note that LLC is the most convenient option. It takes a little time. In all cases, the main purpose is to structure ownership in such a way as to provide the resident the opportunity to lower rates on capital gains from the sale of property, and to protect it from the tax burden in case of death of the owner.
3. You should carefully plan the deal. With the right approach, with professional assistance, the amount of tax payments can significantly reduce.
Portal HomesOverseas.EN thanks for the help in preparing this article Irina Simonyan, Director of marketing of the company Henley&Partners and Jeffrey Rubinger, a specialist in domestic and international tax law company Bilzin Sumberg (USA).
photocredits: flickr
Prepared By Olga Potaeva
HomesOverseas.ru
