Keyzy. U.S. property, non-resident

Reference

Glossary

The terms, forms and acronyms a non-resident owner meets, in plain language. Each one links to the guide where the rule is set out with its source.

20 terms

A

Amount realised

For FIRPTA, the total the seller receives: cash paid, the fair value of other property transferred, and liabilities the buyer assumes or that attach to the property. Withholding is a percentage of this, not of the gain.

In the guide

D

Disregarded entity

A single-member LLC that, by default, is ignored for U.S. income tax, so its income is reported by its owner. A foreign-owned one still has its own information filing (Form 5472).

In the guide
Domicile

For estate tax, where a person lives with the intention of remaining. A non-citizen who is not domiciled in the U.S. is taxed only on U.S.-situated assets, with a much smaller exemption.

In the guide

E

Effectively connected income (ECI)

Income treated as connected with a U.S. trade or business. It is taxed on a net basis at graduated rates instead of the flat 30% on gross income.

In the guide
EIN

Employer Identification Number. The federal tax number for an entity such as an LLC, applied for on Form SS-4.

In the guide
Estate tax treaty

An agreement between the U.S. and another country that can change how U.S. estate tax applies to that country's residents. Only a small number of countries have one.

In the guide

F

FIRPTA

Foreign Investment in Real Property Tax Act. Requires the buyer to withhold part of the price when a foreign person sells a U.S. real property interest.

In the guide
Foreign national loan

A mortgage product for borrowers without U.S. credit history or residence, underwritten and priced differently from standard U.S. loans.

In the guide
Form 1040-NR

The U.S. income tax return for a non-resident individual, used to report rental income and claim deductions when taxed on a net basis.

In the guide
Form 5472

Information return a foreign-owned single-member LLC files, with a pro forma Form 1120, to report transactions with its owner. Late or missing filings carry a heavy penalty.

In the guide
Form 706-NA

The U.S. estate tax return for a non-resident, non-citizen decedent.

In the guide
Form 8288

Filed by the buyer (the withholding agent) to report and pay over FIRPTA withholding. Form 8288-A is the statement that goes to the seller.

In the guide
Form 8288-B

Application for a withholding certificate, used to reduce or eliminate FIRPTA withholding before or at closing.

In the guide
Form W-7

Application for an ITIN.

In the guide
Form W-8ECI

Given to the payer of rent to certify that the income is effectively connected with a U.S. trade or business, so the 30% gross withholding does not apply.

In the guide

I

ITIN

Individual Taxpayer Identification Number. Issued to individuals who must file U.S. tax returns but cannot get a Social Security number.

In the guide

S

Section 871(d) election

An election that lets a non-resident treat U.S. real property income as effectively connected, so rent is taxed on net income after deductions instead of 30% of gross.

In the guide

U

U.S.-situated assets

Assets treated as located in the U.S. for estate tax, which includes U.S. real estate. These are what the estate of a non-domiciled owner is taxed on.

In the guide
Unified credit

A credit against U.S. estate tax. The amount available to a non-resident's estate is far smaller than a U.S. person's.

In the guide

W

Withholding agent

The person required to withhold tax on a payment, for FIRPTA generally the buyer, who can be held liable for any amount not withheld.

In the guide

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