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Returning Member

Tax on Real Estate Investment

Hello! I would like to inquire about tax on real estate investment. I'm not a US citizen but on a non-immigrant work visa. I'm considering doing some small investments. How would I be taxed on the interest I gain from the investment? Thank you!

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Level 10 pk
Level 10

Tax on Real Estate Investment

Just based on your post

(a) assuming that  you are a "resident for tax purposes" i.e. have met the substantial presence test,  you are taxed same as a US citizen.  Investment income is generally passive income -- interest, dividend etc.  Real-estate investment (while passive ) is taxed only when disposed off  or when it produces income -- thus  if you buy a property and use it as your main or secondary  home, there is no taxes  till dispose off the prop and even then there may gain exclusion ( no losses  allowed/ recognized); if on the other hand you acquire real-estate  and use it for income generation,  you are taxed  only on the net gain and losses are allowed and gains are  taxed at disposal.

(b) when you leave and go back to your country, you automatically become  a Non-Resident Alien, taxed only on your US sourced  / connected income. In such a situation  you report  on form 1040-NR and are taxed at a flat rate ( but you pay no FICA taxes  ---- social security & medicare , 15.3% total ).


Does this help or do you need more detailed explanation ?   If you do need more then you need to  answer  1. which country are you from ( for treaty considerations ); 2.  do you plan to go back or stay in the USA  for the foreseeable future; (3)  income property investment or  buying a home that you will use for yourself  etc. etc.