Israelis Investing in America

[Yehoshua Kahan]

Does anybody here know the implications under Israeli tax law of an Israeli citizen buying and/or selling American real estate?  To be most specific, to what extent do capital gains taxes apply?  Purchase taxes?  Depreciation?  A bit specialized, I know, but then there are a lot of people here.  Much appreciated!

[Lance Lvovsky]

I assume you mean under what implications do U.S. Federal tax laws apply to an Israeli citizen buying property in the U.S.?

Here is a good page from the IRS that explains the tax implications:

https://www.irs.gov/individuals/international-taxp...

Basically, you would likely be filing a Form 1040NR. You still get the same depreciation benefits as anyone else on property held here in America. 

I definitely recommend you get with a CPA. You would want a CPA that has experience in both real estate and working with foreigners. Let me know if you have any other questions I can answer for you.

P.S. I was in Jerusalem last year... not too far from you. 

[Yehoshua Kahan]

No, I actually meant Israeli tax law.  When I buy an investment property in Israel, there are heavy purchase and capital gains taxes, meant to discourage real estate investment, as part of a misguided effort to bring down housing costs.  (The way to bring down housing costs is to build more housing, not prevent people from investing in it.)  

If I have American-source income, I must pay Israeli taxes on it, after applying foreign tax credits for the amount due the US government.  I'm trying to determine whether the above-mentioned Israeli taxes apply only to RE in Israel, or also to RE in America.

Nevertheless, I appreciate your information, and am sure that it will be useful to me.  Thank you.

Incidentally, I'm actually a dual American-Israeli citizen (I was born and grew up in California), so presumably US tax law would apply to me in the same way that it applies to any other US citizen.

Yes, certainly I need to speak to a tax expert who specializes in those of us that need to deal with both systems; my question here was merely meant to get some preliminary information, so that I don't waste money and time with simple questions.

Next time you're in Israel, drop me a line--I'd love to have you (and your family, if they're with) over for a meal!

[Tzvi Ausubel]

@Yehoshua Kahan you need to consider US-Israel tax treaty.

[Yehoshua Kahan]

@Tzvi Ausubel, what do you mean?  

[Saul L.]

@Yehoshua Kahan - As far as I know Israeli Tax authorities do not treat foreign real estate investing as they would Israeli Real Estate. A real estate holding overseas is treated like any other investment and taxed at 25% of profits- exactly as if it was a stock or bond held on a foreign stock exchange. I use an Israeli CPA who is licensed in the US and handles all my annual tax returns. PM me if you would like his details.

[Chris K.]

Hi @Yehoshua Kahan:

I don't know if you got the answer but @Tzvi Ausubel was suggesting that you take a look at the tax treaty between United States and Israel. Essentially countries understand what their citizens may want to invest in other countries. To facilitate that process, they enter into tax treaties where they clarify how they will tax a foreign citizen that invests in their country. It typically outlines what countries gets to tax the income depending on the source. 

This is what I found on the IRS website. Obviously it's not a light read, but I would send it over to your accountant/CPA to see if they are familiar with it. 

https://www.irs.gov/pub/irs-trty/israel.pdf

If you wish, I can ask my investors friends to see if they have a CPA they can recommend. Many of them are dual citizens in U.S. and Israel, so I assume they had to find out the answers to the same issues you are dealing with now. PM me if you wish.