U.S. Non-Resident Tax Compliance
Listed below are the primary taxation and compliance issues of which a non-resident owner of Florida rental property should be aware.
Income Tax - All property owners residing outside of the US who receive income from their rental homes, where IRS withholding has not been applied, must file a US Income Tax Return. The US tax year runs January to December and returns are due by June 15th annually. Expenses are offset against the rental income and any relevant losses carried forward year on year until the eventual sale of the property when losses may be used to minimize any capital gain on the property. Please contact us for information on personal use of your US property, allocation of expenses, “passive activity loss” and “vacation home loss”.
Tangible Personal Property Tax is an ad valorem tax assessed against the furniture, fixtures and equipment located in business and rental property. Tax returns must be filed to the Property Appraiser’s Office by April 1st. Tax billing follows processing of the tax returns by the county and is sent out November 1st each year with payments due by March 31st. A $25,000 exemption applies, but an initial return must be filed to claim this in the first year of ownership.
Property or Real Estate Taxes are payable annually. The Property Appraiser’s Office establishes the assessed value of a property and prepares the tax roll. Tax notices are served to the owner’s last record of address or, where the property owner pays through an escrow account and their mortgage company has requested to be sent the tax bill, the owner will receive a copy of the notice. Tax statements are normally mailed out on or before November 1st each year.
Sales & Use Tax and Tourist Development Tax - if you rent your property for periods of less than six months you will be required to collect and pay Sales & Use Tax and Tourist Development Tax on rental income received. Your management company will usually collect and report all sales and tourist development tax on the rentals they handle. However, if you receive rental income directly you will also need to collect and report sales and tourist development tax on the income, either through your management company or directly with the relevant authorities. If you choose to deal directly, you can make application to the State and County to set up these accounts, alternatively we will prepare and file submissions on your behalf to set up your accounts and assist with the initial filings.
Local Business Tax - Required by homeowners who rent their US property. Renewed annually to the Tax Collectors Office (in the County where the rental property is located). The application for this license is usually handled by your managing agent but you may also be required to file if you intend renting your property directly.
Hotel License - If operating on a short term vacation rental basis, each rental home must have a Florida Hotel License which is renewed annually. The application and renewal of this license is usually handled by your management company but we recommend that you keep a copy in your personal files. If you need to apply yourself let us know if we can be of assistance
Bureau of Economic Analysis - All foreign investments in the US business enterprises in which a foreign person owns a ten-percent-or-more interest are subject to reporting, including all ownership of real estate, improved and unimproved. We will make your initial filing as part of the set-up of your account. A quinquennial return is then required, the next one falling due May 2018
Individual Taxpayer Identification Number (ITIN) - All non-resident owners of US rental property must have an ITIN. Please talk to one of our team about the process, which is very specific and varies by individual circumstances.
Form W-8ECI – This “Certificate of Foreign Person’s Claim for Exemption from Withholding on Income Effectively Connected with the Conduct of a Trade or Business in the United States” is required by your management company. Without this form in their files, they are required by U.S. federal law to withhold 30% of your rental income and pay that amount to IRS.
Whilst some of the above items will be serviced by your management company; the preparation and filing of the US Income Tax Returns(s) to the IRS, Tangible Personal Property Tax Return(s) to the County and filings to the Bureau of Economic Analysis are usually handled by your tax specialist.
Provided Courtesy of Eccleston International Tax:
Vacation Home & Non-Resident Investment Tax Specialists
3253 Rolling Oaks Blvd., Kissimmee, FL 34747
Tel: (407) 530-0124 | Fax: (407) 536 5019
Email: firstname.lastname@example.org | Website: http://eccleston.tax