Real-Estate Investors

Whether directly owned, through an LLC, an investment company, or more, thousands of Israelis decided to invest their best money in real estate assets in the US. An important aspect to consider before investing is the aspect of taxation on gains/losses from real estate, whether from rent or capital gain/loss from the sale of a property.

The tax treaty between Israel and the US states that the initial right to tax income from real estate situated in the US belongs to the US. To ensure that the tax due from foreign (non-American) real estate investors is collected, the Internal Revenue Service (IRS) has imposed several withholding tax mechanisms that entrust more “official” entities rather than the individual investor with the obligation of making sure the tax is collected. 

That is, in the absolute majority of cases when A non-US person has income or a profit from real estate located in the US, the title company or the entity through which the investment is made (e.g., an investment company or multi-partner LLC) will deduct a tax rate that is higher than the real tax rate that he must pay. First to ensure that the tax due is collected, and second, to encourage the investor to submit an individual tax return and request the tax refund he deserves.

The bottom line is that it doesn’t matter how you choose to invest in US real estate, there are taxation aspects paired with certain reporting obligations that you should consider before, during, and after making your investment.

Contact us at Digitax to receive professional, reliable, and complete service in American tax reporting and returns.