Taxing Non Residents in the U.S. & Home Country

If you are a nonresident who owns and rents U.S. property then you are subject to U.S. income tax on any rental income you receive from your U.S. real estate property. Income can be reported in the U.S. in one of two ways:

30% Withholding Tax on Gross Rents
You can choose to have your gross rental income taxed at a flat rate of 30%. The advantage of this method, is that you do not have to file a U.S. tax return to report this income however it does not permit you to deduct any expenses from operating your rental property.

Pay Tax on Net Rental Income
You can elect to file a U.S. income tax return to report the income less operating expenses such as management fees, repairs, supplies, utilities, property taxes, mortgage interest & depreciation etc. This method subjects any net income to marginal tax rates which will likely be substantially lower than the gross rental income amount subject to the 30% withholding tax. To elect this method your management company or booking agent will have you complete Form W-8ECI and you will need an Individual Taxpayer Identification Number (ITIN).

Reporting U.S. Source Income in Home Country
Regardless of which method you select for reporting and paying tax to the U.S. authorities, you may still be required to report the U.S. source income in your home country. Check with your local accountant or tax authority.

Tax Treaties
The U.S. has tax treaties with a number of foreign countries. Under these treaties, residents (not necessarily citizens) of foreign countries may be eligible to be taxed at a reduced rate or exempt from tax on certain items of income they receive from sources within the U.S. These reduced rates and exemptions vary among countries and specific items of income.

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