Are you a foreigner looking to sell property in the United States? Selling property as a foreigner is a common practice in the global real estate market. Whether you're from Mexico and want to invest in Houston, TX, or from Ireland and dream of owning a cabin in Appalachia, knowing how to sell property in the U.S. is essential.
First, Obtain a Taxpayer Identification Number
A taxpayer identification number (TIN) is a necessary requirement for both resident and non-resident aliens. It is used by the IRS for tax filing purposes. TINs can be obtained through the IRS by filling out the necessary forms. Without a TIN, you cannot sell property in the U.S. as a foreigner. Visit the IRS website for more information on how to apply for a TIN.
Resident Alien Vs. Non-Resident Alien
The process of selling property in the U.S. differs for resident aliens and non-resident aliens. Let's understand the distinction.
A resident alien is a foreigner living in the U.S. with either a permanent resident card (green card) or substantial presence. Substantial presence means being present in the U.S. for at least 31 days during the current year and a total of 183 days during a 3-year period.
If you don't possess a green card or don't meet the substantial presence criteria, you are considered a non-resident alien. Being a non-resident alien does not disqualify you from selling property in the U.S., but it does entail a slightly different process.
Whether Resident or Non-Resident, Get an Agent
Foreigners selling property in the U.S. require the assistance of real estate agents, just like U.S. citizens. A skilled real estate agent will help optimize your property listing for the local market. They will guide you on the ideal time to sell and connect you with reliable lawyers and title companies, which are essential in the selling process. If you are not currently residing in the U.S. or the property you are selling, having an agent on the ground will be invaluable in navigating any obstacles that may arise.
We recommend choosing a real estate agent with CIPS certification. The Certified International Property Specialist (CIPS) designation is awarded to agents who have completed coursework specifically tailored to assisting foreigners in buying and selling real estate. CIPS realtors are not only well-prepared to help you sell property in the U.S. as a foreigner but are also part of a network of professionals who can make the entire process as seamless as possible.
How to Sell Property in the U.S. as a Resident Alien
To sell property in the U.S. as a resident alien, you will follow the same process and tax laws as U.S. citizens. This means you will be required to pay capital gains tax to the U.S. government, as well as potential taxes to your home country.
Understanding Capital Gains Taxes
When selling an asset in the U.S., such as a house, car, or stocks, you may have to pay a fee if the profit from the sale exceeds the original purchase cost. This fee, known as the capital gains tax, can range from 15% to 30% of the sale. However, there are certain exemptions available.
If the property you're selling is your primary residence and you have lived in it for at least two years preceding the sale, you may be eligible for a tax deduction on up to $250,000 of the profit ($500,000 if filing jointly with your spouse). This is known as the main home sale exclusion. Additionally, if you didn't make a profit or can prove a loss from the sale, you may be exempt from paying capital gains tax. In certain cases, such as health-related issues or change of employment, you may also qualify for a reduced exclusion from the gain on the sale.
How to Sell Property in the U.S. as a Non-Resident Alien
If you're selling property in the U.S. as a non-resident alien, you are not required to pay capital gains tax directly. Instead, the buyer will withhold 15% of the total purchase funds and remit that amount to the IRS as income tax on the disposition of your property. This is in compliance with the Foreign Investment in Real Property Tax Act of 1980, which applies to all non-resident foreigners selling property in the U.S.
It is the buyer's responsibility to withhold and submit the funds to the IRS, not the seller. However, non-resident aliens can apply for exemptions from the 15% withholding if the profits from the sale are below $300,000. To successfully obtain any exemptions, you must be prepared to complete the necessary paperwork several months in advance. For more details on these exceptions, refer to the IRS website.
Selling Property in the U.S. as a Foreigner
The challenges involved in selling property in the U.S. as a foreigner depend on whether you are selling the property for profit or if the profit is simply a result of moving from one home to another. For resident aliens, venturing into real estate as a business decision is relatively easier due to the opportunities to avoid capital gains taxes. Understanding your status with the IRS and relying on the guidance of an experienced agent will help you navigate the process smoothly and legally.
Now that you have learned how to sell property in the U.S., you may be wondering about the proceeds from the sale. To gain a better understanding of where your money goes and why it doesn't all go to you, read our comprehensive guide.
Note: The images used in this article are from the original source article.
