Owning rental property in the United States as a foreign national brings with it important US tax filing obligations and compliance requirements. Understanding these responsibilities is essential to staying compliant and avoiding penalties.

Below is an overview of the key federal tax rules and reporting requirements for foreign owners of US rental property:

1. US Income Tax Return (Form 1040-NR)

All non-US individuals who earn rental income from US property are required to file an annual US Nonresident Income Tax Return (Form 1040-NR).

• Filing Period: January 1 – December 31 (calendar year)
• Filing Deadline: June 15^th of the following year for non-resident individuals
• Extensions: A free automatic extension to October 15 is available upon request

2. Capital Gains Tax on Property Sales

When a US property is sold, the net capital gain (sale price minus tax basis of the property) is subject to US capital gains tax.

• Long-Term Capital Gains Rate: 15% if held more than one year
• Annual Long-Term Capital Gains Exemption: First $48,350 (for 2025) of gain may be exempt (subject to change annually)
• Short-Term Capital Gains Rate: 30% if held one year or less

3. Withholding Tax on Rental Income

If a property owner does not provide a valid US ITIN (or EIN for corporate entities), US rental agents are required to withhold 30% of the gross rental income and remit it to the IRS.

• Filing a US Tax Return allows owners to report net income after expenses, often resulting in a refund of the submitted withholding.

4. Bureau of Economic Analysis (BEA) Reporting

The US Bureau of Economic Analysis (BEA) requires periodic reporting by foreign investors in US real estate.

• Who Must Report: Foreign individuals or entities with 10% or more ownership or voting interest in US business enterprises, including real estate (excluding purely personal use properties)
• Frequency: Every five years (most recent report due in 2028)
• Form: BE-12 or applicable series, depending on ownership and structure

5. U.S. Wills, Trusts & Estate Tax Planning

Foreign individuals owning US assets, including real estate, should be aware of potential US estate tax exposure, especially if the property is valued over certain thresholds.

We recommend proper estate planning to minimize tax liabilities and ensure assets are passed according to your wishes.

• For personalized advice or introductions to trusted US estate attorneys, please contact Simon Howell—our in-house specialist who can guide or refer you as needed.

Stay Compliant – Protect Your Investment

The US tax system can be complex, especially for non-resident property owners. Our international tax professionals specialize in helping clients:

• Minimize withholding through proper structuring
• File accurate US returns to reclaim overpaid withholding
• Meet BEA and IRS reporting obligations
• Navigate real estate sales and capital gains tax
• Plan for estate tax and ownership transitions

Need help managing your US rental property taxes?
Contact us today for tailored advice and full-service tax support.