Step 01 · Before buying
Choose the ownership structure
Personal name, LLC, corporation, trust: the trade-off is between income tax, asset protection and exposure to US estate tax, which hits non-residents above a very low exemption.
Home / 1040NR Real Estate
Non-residents · Rental property
1040NR and US rental real estate
You are not a US tax resident and you own rental property in the United States. Three decisions determine what you actually pay: the net-basis election, the withholding at source, and the ownership structure. We take them with you, in the right order.
The problem
30 percent of your gross rent, or tax on your actual profit
By default, rent paid to a non-resident is subject to a 30 percent withholding on the gross amount, with no deductions at all: no mortgage interest, no property tax, no expenses, no depreciation. By electing to treat the property as effectively connected with a US trade or business, you are taxed on the net result at graduated rates. On a financed property, the gap is often thousands of dollars a year.
| Without the election | With the net-basis election |
|---|---|
| 30 percent withholding on gross rent | Graduated tax on the net result |
| No deductible expenses | Interest, property tax, insurance, management, repairs, depreciation |
| The tenant or manager acts as withholding agent | Form W-8ECI given to the payer to lift the withholding |
| No loss carryforward | Losses carried forward against future US rental income |
1040NR return often overlooked | Annual 1040NR return, due June 15 |
The election is made once and applies to later years, but it has to be made correctly on the first return concerned. A late correction is still possible in some cases.
The journey
From purchase to sale, the steps that matter
Step 02 · When letting
Obtain an ITIN and lift the withholding
Taxpayer identification number (Form W-7) for you, and often for your spouse. Form W-8ECI given to the manager to avoid the 30 percent withholding from the first rent payment.
Step 03 · Every year
File and depreciate
Form 1040NR with the rental income schedule, depreciation of the building over 27.5 years for residential property held by a non-resident, tracking of carried-forward losses, and state returns where the state taxes income.
Step 04 · On sale
Control FIRPTA
The buyer generally withholds 15 percent of the gross sale price and remits it to the IRS. A withholding certificate application (Form 8288-B), filed before closing, aligns the withholding with the tax actually due.
Common special cases
- Short-term rentals: above a certain level of services, the activity can leave the rental regime and become a trade or business, with different tax consequences.
- Florida: no personal income tax, but tourist development tax and sales tax on rentals under six months, plus a tangible personal property return.
- Single-member LLC owned by a foreign person: a Form 5472 with a pro forma 1120 must be filed, with a high fixed penalty if it is missed.
- Joint ownership and French SCI: French tax transparency is not recognised identically in the United States; the classification has to be checked.
- France, United States tax treaty: it allocates taxation of real estate income to the state where the property sits and organises relief from double taxation on the French side.
What we do
One flat fee, four deliverables
- A written diagnosis of your situation and your actual obligations
- ITIN application and the right forms filed with the payers
- Annual Form 1040NR, federal and state where required
- Support through the sale, including the 8288-B application
Frequently asked
1040NR and real estate: what we are asked most
Do I have to file if my property runs at a loss?
Yes. Filing the return is what makes the loss valid and carried forward against US rental income in later years. Not filing exposes you instead to tax on gross rent.
What is the 1040NR filing deadline?
June 15 for a non-resident whose income was not subject to wage withholding, with an extension available. Deadlines differ if you also receive US wages.
Do I need an ITIN if I have no US social security number?
Yes. An ITIN is required to file a return, to appear on a sale subject to FIRPTA, and to apply for reduced withholding.
Can I recover the 15 percent withheld on the sale?
FIRPTA withholding is a payment on account, not a final tax. It is settled either through the return for the year of the sale, or in advance through a withholding certificate filed before closing.
Can my French SCI hold the property?
Technically yes, but the US classification of an SCI is not automatic and can lead to tax at the entity level. That decision belongs before the acquisition.
This page sets out the general rules that apply to non-residents. Amounts, thresholds and deadlines change and depend on your personal situation. It is not individual tax advice.
Review your position before the next deadline
Thirty minutes with a French-speaking accountant to frame your situation and price the work.