Thursday, December 03, 2009

US Tax Filing for Offshore Property Owners

With 53 million tourists visit Orlando annually, many visitors decide to purchase a second home or vacation rental to enjoy the area multiple times year round.  When purchasing a vacation rental, the property must be zoned for a short term rental, meaning renting for periods of time less than 6 months.  This will allow an owner to rent out the property during the periods they are not using the property.  The income received from this rental will need to be reported for Sales and Tourist Development Tax and for US Federal Tax Returns.

Many offshore property investors and rental property owners are unaware of their County, State, and Federal tax filing requirements.  All property owners residing offshore who receive income from their rental property must file an US Income Tax return annually.  Your tax return will need to be submitted before April 15 or June 15 for non-resident filers.

In order to file for US Tax Return you must have an Individual Taxpayer Identification Number (ITIN) and you can obtain the W-7 form from IRS.gov.  Your tax representative can assist you in completing this form and file it on your behalf, and this can be submitted when your first tax return is initally filed.

Sales and Tourist Development Tax is collected and paid by your property managment company on your behalf, however, if you collect income directly you will need report this income to your property management company or direclty to the appropriate authorities.

Other taxes to be paid is your annually property taxes. You will receive a tax bill in the mail just prior to November 1st and you will have until March to pay your bill directly to appropriate Property Appraisers Office in the county where your property resides.  

When you go to sell your property, you may need to pay tax on the profit of your home.  There are specific guidelines for Foreign sellers under the "Foreign Investment in Real Property Tax Act" (FIRPTA) in which 10% tax will be withheld from the sale unless a withholding certificate is filed prior to closing to reduce this obligation.

We recommend that all foreign owners hire a tax representative to assist them in setting up a US Bank account, file the correct forms, report all the tax information accurately and timely, and make sure that all deductions are maximized.  There are certain instances, where expenses can be offset against rental income such as cleaning, maintenance, advertising, commission, insurance, utitlies, flights, and car hire to name a few.

For all your tax management needs please contact DiAnna Ashton, specializing in Foreign National Tax Filings.