Buying a property in America

[rodimus]

Hi
For an Australian, what does buying a property in USA do to me in terms of tax?

I intend to buy a property by getting a loan in America. Do I have to pay tax to America or to Australia for the rental income?

How about Capital Gains Tax?

My friend told me buying in America will see me get taxed at the highest level in America. Is that true?

 

[karina]

My understanding is you have an obligation to lodge a tax return with the IRS. Any income earnt in the US must be declared in both Australia and the US. There is a tax treaty between the 2 countries so that you don't pay tax twice.

The amount of capital gain is dependant on how long you have held the property and what structure you set up. If you buy a property in a c-corp you will effectively pay tax twice (I personally don't use this structure). If you elect to have an LLC acting as a pass through entity then the capital gains tax rate can be as low as 15% in the US. The right structure for you is dependant on your personal situation.

A lot will depend on how you structure your purchase in the US. Many Australians elect to purchase US property in an LLC structure. LLC's can be owned by individuals, trusts and even SMSF's. I would recommend seeking the services of a US CPA that is familiar with foreign clients and an Australian CPA that has experience dealing with US investing. I can recommend someone if you need help.

Good luck with your purchase. Make sure you check comparable sales on the property you are buying to ensure you are not overpaying. If the property is located in Atlanta Georgia I would be happy to look it up for you.

Also if you have not come across this website I suggest you check it out.
www.zillow.com

It provides historical information on properties by entering in an address.

If you are purchasing a turn key property "already rented" you may be paying an inflated price. I would encourage you to do some homework and understand the values of the surrounding homes before purchasing.

Disclaimer:I am not a tax professional and the above cannot be used as advise. Please refer to legal and tax professionals.

 

[rodimus]

Hi Karina,
Thank you so much for your answer.

Can the USA property be bought in my own individual name? Any issues with that in terms of tax? Why do people use LLC?

 

[MTR]

Hi Karina,
Thank you so much for your answer.

Can the USA property be bought in my own individual name? Any issues with that in terms of tax? Why do people use LLC?

Asset protection, if you are sued you would not want anything in your own name.

 

[karina]

MTR beat me too it.

Yes asset protection. An LLC creates a seperate legal entity to you as an individual. Its relatively inexpensive to set up and depending on the state the yearly ongoing costs are minimal. In the state of Georgia the annual filing fee is $50 + a $100 registered agent fee.

In california I believe the cost of owning an LLC is much higher.

One of the states with the strongest asset protection laws is Wyoming. It costs a little more to maintain. It may be a good LLC to consider for someone using their SMSF to buy US property. Particularly if the SMSF has lots of money in it.

Again the right structure depends on your personal situation. If you are a doctor for example or in a profession that has a higher risk of getting sued an LLC would be a good choice.

I do recommend seeking the services of a US attorney that is experienced and can give you advise.

Disclaimer: The above information is not advise. Please refer to tax and legal professionals.

 

[MTR]

Hi
For an Australian, what does buying a property in USA do to me in terms of tax?

I intend to buy a property by getting a loan in America. Do I have to pay tax to America or to Australia for the rental income?

How about Capital Gains Tax?

My friend told me buying in America will see me get taxed at the highest level in America. Is that true?

I hope you have researched the loan thoroughly, there are many products that are very high risk. Companies are marketing properties and providing the loans and marking up properties 50%+ so its really a claytons loan.

MTR

 

[karina]

MTR is on the ball.. Some properties are marketed with a loan so clients only need to put 50% down. What they don't realise is that the 50% down they are putting is actually what the property is worth with the other 50% being the profit of the marketing group.

I have seen this on many occasions. Always best to check comparable sales.

 

[rodimus]

Thanks Karina and MTR,

Do you guys have properties in USA? You sound experienced.

If yes, did you buy it yourself or went thru some of the agents promoting in Australia?

 

[MTR]

Thanks Karina and MTR,

Do you guys have properties in USA? You sound experienced.

If yes, did you buy it yourself or went thru some of the agents promoting in Australia?

You can check out most of my properties in my photo gallery, I purchased 8.


Do you mind sharing which company you may use??

I would also look at Karina's web site

 

[Sove18a]

Can you buy property in ANY state in the US or are there limits in which states you can buy as an Australian?

If so, which states do allow you to buy property?

 

[Byoung2335]

I'm a dual citizen of both the US and Australia but can't even find loan packages I'm eligible for.

Chase, TD and Wells Fargo in America won't touch me because I havent created a credit history in the US, my income is from outside the country and I haven't lodged the any tax returns declaring my foreign income.


ANZ don't do loans for foreign investments because they are unable to survey the property before purchase?

Ideally I would like to take advantage of my citizenship and use American interest rates....

Do I need to go find a mortgage broker in AU that is experienced in all this to point me on the right direction?

 

[MTR]

I'm a dual citizen of both the US and Australia but can't even find loan packages I'm eligible for.

Chase, TD and Wells Fargo in America won't touch me because I havent created a credit history in the US, my income is from outside the country and I haven't lodged the any tax returns declaring my foreign income.


ANZ don't do loans for foreign investments because they are unable to survey the property before purchase?

Ideally I would like to take advantage of my citizenship and use American interest rates....

Do I need to go find a mortgage broker in AU that is experienced in all this to point me on the right direction?

Mortgage broker in Oz wont be able to help, the issue is credit rating in US which you need to establish, find the solution and you will fix the problem. What do you require to establish a credit rating ask one of the banks in US?? move forward this way, however this will take time, 1 year perhaps?? it will be a tad late as prices are continuing to rise and I see that the number of foreclosures is now declining.