How can a US-Non resident owning property pay rental income and property taxes?

Question

My parents ( non-US resident) want to buy a house in the US, but they reside overseas. I have confirmed they can buy the property. No law in the US says they can't. The twists is that they plan on renting the house for income and somehow have to pay income and property taxes. How does it work? Since no resident no SSN etc...

Answer 1

It works exactly the same as for a resident, except for these three differences:



1. Instead of using an SSN, they use an ITIN. For tax-filing purposes, an ITIN is used exactly the same way as an SSN. The only difference is that an ITIN cannot be used for employment.

2. Instead of filing a Form 1040, they file a Form 1040(NR).

3. When they enter the address of their residence on the form, they need to specify the country.



Everything else is the same.

Answer 2

http://www.irs.gov/businesses/small/international/article/0,,id=129631,00.html



Two ways to file taxes. 30% withheld for rent *or* file schedule E and claim expenses/depreciation. For the first year, the 30% is withheld, but if they file, they get the excess back.



To get the ITIN, as soon as the buy the house, they submit a copy of the contract with the w-7 form (if they buy it jointly, they need 2 forms). There is an exception under reason h that lets them get the number *before* they file.



Note, an issue that nobody ever brings up. If they die and it's worth $60K or more, you would have to file a US estate return. This can be a pain to do. If they merely grow old and sell, they have to deal with FIRPTA (10% of the sales price is withheld towards the final tax bill), filing a return and AMT. (When you sell, the schedule E depreciation is recognized, so they have to pay that back as well.)

Answer 3

The property taxes are just assessed to the owner of the property, so no social security number is necessary. They will just be sent a bill and, if they don't pay it, a lien would be placed on the property.

Answer 4

By filing a nonresident tax return (with Sch E) on income received in US. They are required to do so. Have to get an ITIN # from IRS, by completing W-7.