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OWNING A USA INVESTMENT PROPERTY

FILING A USA TAX RETURN WITH THE IRS

The content on this page is reproduced with kind permission from Richard Lillycrop.

Tax years in the US run from January 1st to 31st December and each year you must complete a tax return and send it to the IRS. Tax returns must be received by the IRS by April 15th. If you live outside the US, you are allowed a 2-month extension to June 15th, but any taxes due must be paid by April 15th.

You have two options when completing your tax return. The first is to use an INBIB Certified Public Accountant (CPA) which can cost anything between $500-$2000. Once you give them your figures, they will take care of the rest. Please go to INBIB USA representation options.

At the end of each tax year you will receive a 1099 from each property manager showing the gross rents you have received for your properties (shown above), along with their tax ID number and details. You will also get a statement for the year showing rents received, total expenses, management fees etc. This makes it really easy to pass on this information to a CPA or input into TurboTax. INBIB provides services as both an Acceptance Agent accredited CPA and Notary.

Non US residents will need to file a 1040-NR, shown opposite and US residents fill out a 1040. If you have an LLC (Company) then you will have a Schedule C. Income, expenses and depreciation for each property is listed on your Schedule E. Depreciation is a tax incentive you are given by the IRS. They write off the improvement value of your property over 27.5 years. The depreciation calculations for each property are shown on Form 4562. Turbo Tax doesn't produce a 1040-NR directly for you, but it is easy to transfer the 1040 information onto a 1040-NR.

This is a big tax incentive from the IRS, as you can make a real profit from your rental real estate, but on paper make a loss. INBIB's Certified Practicing Accountant is well versed in these procedures.

There is a good chance if rental income is your only US-based income, after taking into account depreciation, you will have made a passive loss. If this is the case you will list it on Form 8582. Unfortunately you can't get a check back from the IRS, unless you have already paid taxes or had taxes withheld, so you can elect to have to loss carried forward to offset any profit you make the following year.

If you have an LLC, in certain states you may have to mail an additional state return. INBIB will assist and advise clients in these complex areas if instructed.

Return to the "What you need to know" Information page

Please Note - The information contained above should not be regarded as legal or tax advice and is our opinion only.

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