Non-Resident US Tax Preparation (1040NR)
All rental property owners who rent out their property for 14 days or more are required to file US Federal Tax Returns (1040NR) and in some cases State Tax Returns, regardless of whether they make a profit and regardless of the tax filing requirement in their own country of residence.
The 1040NR Returns are due annually and cover the period 1st January to 31st December (The final deadline for filing is June 15th of the following year).
Our own tax filing schedule begins in January when we issue our straightforward tax questionnaire (OAS1) Alternatively, this form can be downloaded from our website. We request completion and return of this form by end February, together with supporting documentation. We do not require receipts or invoices etc. but request copies of Annual Interest statements, both received and paid.
Expenses are offset against rental income and the list of allowable expenses includes operating costs, utilities, Mortgage Interest, Real Estate Tax, Insurance, Management fees and travel costs It is essential for each property owner listed on the Title deeds to submit their own individual US Tax Returns.
In addition, the property is depreciated over 27.5 years and furniture between 5-15 years. As a result, most rental homeowners have no taxable income and losses are filed which carry forward indefinitely. Those resulting losses, subject to certain personal use limitations, can be used to offset any eventual Capital Gains Tax which might be due at the time of selling the property.
The filing of US Federal Tax Returns, therefore, has considerable benefit for the homeowner, whilst fulfilling statutory obligations at the same time. The 1040NR Returns normally result in a loss and ultimately save money for the homeowner, by eliminating (or greatly reducing) the Capital Gains Tax when the property is sold.
At the end of the year, your management company will also send form 1042S to the IRS, confirming the amount of rental income received by the homeowner in that year. (A copy of the 1042S will also be issued to the homeowner) If you wish to avoid tax withholding on your rental income of 30%, you must provide your management company with a signed W8-ECI form.
This must include your US Tax ID (or ITIN), which will exempt you from Withholding. When you engage our services, we immediately apply for the US tax ID on your behalf if you not already have one.