Any foreign national, when purchasing a property in Miami, must be aware of the local laws prior to making such an investment. These points are fundamental and should be considered together with an attorney or an accountant before signing the closing documents for the tax consequences of these decisions.
Mistake #1: Personal Name or Company Name.
Even if you are young, healthy, and full of energy, it’s never too soon to start planning the distribution of your estate when you no longer will be with your loved ones. United States imposes estate taxes, up to 40% on thegross estate, including stocks of US corporations, belonging to a foreigner above $60,000. If the property is purchased together with another person, the joint tenant will have to prove the contributions made to the purchases.
Mistake #2: Use a Foreign Corporation to Protect from USA Estate Taxes.
If it is done correctly, it can be true; otherwise a corporation cannot protect your assets. In general, there must be an agreement between the foreign company and the national corporation at all times that the property is used for personal use, rented, or generating income, and proper accounting declared to the IRS. There are many possible structures that can protect your assets, and an attorney can help you choose the right one within the time frame for the closing.
Mistake #3: Deciding to Use the Same Structure as Your Friend.
If you know someone who bought a property in the USA and created a foreign company to protect their assets, it is incorrect to believe that the same structure might work for you too. Each case is different, and depends of the value of the property, the individual income of each individual, of the personal goals of each one, and its distribution within the family. The American government will tax the property in its sale if there are profits, and a foreign company can complicate the process.
Mistake #4: Transferring the Property to Another Person.
A foreigner’s gift, a sale, or the transfer of a property is always subject to US Income Tax under the Foreign Investment in Real Property Tax Act, or FIRPTA. The recipient of the property must pay 15% of the value of the gross proceeds to the IRS. In addition, in 2013, the American government imposed a gift tax on the transfer of US real estate or any gift that exceeds $14,000 or $143,000 between spouses.
Mistake #5: Believe that it’s ok to stay less than six months at a time.
Many people believe that once they receive the visa to come to the USA, and they pass through customs, they can stay for six months. They believe further that they can leave the country, and come back, staying another six months without any consequence. Technically, this is incorrect. A foreigner is considered a US resident for income tax purposes if the average of days spent in the USA over a three-year period equals or exceeds 183 days each year. After 120 days in one year, this is considered “substantial presence” and the foreigner will generally become a tax resident. There are obviously some exceptions, but the government will request some explanation. With the proper planning, you can save costly surprises in the purchase of your property in the USA. Make an investment for your future, protect your assets, and buy with confidence. Talk to me!
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