All Forum Posts by: Sebastian Mau

Q: If I get rental income from US properties as a non-resident, do I have to pay 30% taxes on it?

Hi all, 

I have seen a lot of questions around this topic and I did some research because I had a similar question. Hoping that this might be helpful to someone that also has this question. Rather than just asking, I thought I help out, since I am learning so much from this community.

I am currently a permanent resident in the US and planning to invest in rental properties. I am all set and ready to go but I wanted to find out the tax situation for the following: 

I am planning to move out of the US - to Germany - at some point and I might not have received citizenship till then. Now, I was wondering about the tax situation as a potential future non-resident investor. Looks like there are two options:

1. Don't file taxes in the US, then 30% of my rental income will be withheld by the IRS. That's it. Not a great deal.

2. File taxes - Report rental income on a 1040NR - the nice thing with this is that I can deduct all expenses, repairs and depreciation from it. A non-resident owner must also provide a form W-8ECI to the rental agent (property manager) and obtain a tax payer identification number. For my case, I keep my SSN even when I move. But if you have never had one, you need to apply by filing a W-7.

Well, that seems to be it. Seems very similar to if a US resident does this. I hope I am not missing anything here. 

If anyone reads this and disagrees (or knows better), please let me know. Paying those 30% would be a major blow to my REI plans in the US and I fear, would stop me from even getting started.

I agree with this sentiment. Dividend growth for CF.

What appeals to me is the leverage component of RE. So if both can be combined, some CF and investing with leverage this seems to be desirable (though hard to find)
I want to understand better how you define “quality real estate”. 

Are you saying one should look for Class A real estate, buy and hold or what do you mean with “quality”. 

Thank you, Sebastian

Thank you for starting this thread @Krystin Aversa 

I am in the exact same situation, having similar thoughts. 

Here are the things I am observing. (Also a complete newb and recently decided to invest in RE and making up my mind Bay Area vs MF OOS vs Syndication)

One thing about the Bay Area is, recently I am seeing a lot of vacancy. My landlord is having 2 empty apartments since summer. He might do a bad job advertising but there a lot of “room for rent” out here in the mid peninsula right now. So buying an SF/MF is not just expensive here, it is also currently hard to find renters.
The general expenses & taxes are also something that make me hesitate to buy here. If I’d buy a 1.5m property where I house hack, I already have 10k in taxes to cover. Contractors are very expensive as well. 
I am planning to move out of the country in ~2 years so that’s another factor, not planning to stay here long term. If it was longer term I’d probably feel better about a purchase.

Again, thanks for starting this conversation.