Foreign buyers of real estate investments are subject to tax on rental incomes. Therefore, property purchases need to occur with strict consideration of IRS regulations. The most important factor for tax purposes is whether or not the foreign buyer will be considered a US-Resident. The determining factor is whether or not the buyer passes the ‘Substantial Presence Test’ which evaluates how many days the individual has been in the United States, and if those days are relevant for tax purposes. If you are subject to tax under the Substantial Presence Test,  then your income is taxed as if you own the property and collect rental income as a US Citizen. 

Recent data has revealed that 64% of foreign real estate buyers in Florida purchase the property as a vacation home, meaning that the home is for personal use but not a primary residence. In this situation, there is no rental income and therefore no tax liability other than property ownership taxes. While US Citizens, Lawful Permanent Residences and a select number of other types of immigrants can claim a homestead exemption, this option is not available to international buyers just by way of owning a property.

Buying property in South Florida is advantageous to many international buyers. There is no state income tax, and the number of people looking to establish a life in Florida from other corners of the United States is steady, translating to a spicy rental market. However, if foreign buyers are looking to establish themselves in the United States in a more permanent manner, simply buying an investment or personal property is a useful step, but not enough. There are several ways to merge immigration and real estate, such as through an EB5 and EB2 investment project. Consult with one of our team members to learn more. 

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