Three core taxes for US real estate investment

1. There is income that needs to be taxed.

As long as your property generates income, it will be taxable. If the property is not rented or sold, no U.S. personal income tax return is required.

2. Net income is taxable.

The U.S. tax basis is based on net income, not gross income.

3. There are federal and state taxes.

The U.S. has a two-tier or even three-tier tax system. There is generally a federal tax and a state tax, so paying taxes depends on which state you hold the property in.

For example, you have a house in California and Washington State with a net income of $100,000. At that point the two properties would be reported differently because California has state taxes and Washington does not.

This is especially important to note given the two-tier tax filing system in the United States. If the property is in a state that pays taxes, such as California and New York, don't forget to file a state tax return in addition to the federal tax.

Some states do not. For example, Florida, where we often invest in property, does not require a state tax return and is a tax exempt state.

Net income from real estate investments

Net income = income - costs and expenses

Let's start with real estate income. It includes rent paid by the tenant, laundry paid by the tenant, utilities paid by the tenant, etc.

Question 1:What is the amount of utilities paid by the tenant? How is this calculated?

Let's start with the costs and fees, this part is critical. It is recommended to collect as much as possible because this part is directly related to your net income and is the base for your tax return amount. The more comprehensive your costs and fees collection is, the less tax you will pay.

Costs and fees include rental agency fees, housing management fees, land taxes, utilities, repairs, home depreciation, etc. Among them, there are several costs that are easy to overlook, such as housing management fee and land tax.

Question 2:Why didn't I get a receipt for the housing management fee? Are local taxes the same in every area?

The depreciation expense is the most important expense that many U.S. real estate investors tend to overlook when filing their taxes.

It is recommended that this expense be included in the tax return so that the net income is low or even non-existent and therefore the tax return will be low or even zero.

Question 3: What is depreciation of a home? How is this calculated and how does it help reduce tax liability?

Keep receipts for various expenses

Always depreciate your home

Two or more people hold expensive homes

Try to use bank loans to purchase properties.

3 tax tips for US real estate investors

1. Be sure to file compliance:No income, negative income, no tax return? No! File a return.

2. Be continuous in filing:Especially at the beginning, the investment costs are high. If there is a loss in the first period, it is likely that the net income is negative, but remember to declare continuously. If you don't file, it will be a loss for you in the future.

3. Get an ITIN number as soon as possible: By filing real estate income returns, non-residents can simultaneously obtain a non-resident tax identification number from the IRS, which will help investors conduct business in the U.S. in the future.