Advantages & Disadvantages of Buying as an Individual
Trying to decide how to purchase US real property?
Currently, long term capital gains tax rates are 15% for individuals and there is no capital gains treatment for C corporations. Federal corporate tax rates can be as high as 35%. What this means for the foreign buyer is a tax savings on the capital gains on the sale of the property if it is held individually as opposed to a standard corporation. However, these taxes can be avoided, and the foreign person can obtain the Federal capital gains tax rate of 15%, by creating an LLC. LLC’s allow individuals to be taxed at their own individual tax rate, instead of being subject to the high corporate tax rates of 35%. As a result, there is not a significant advantage in tax treatment to a foreign buyer if they own a property individually.
While there is not a significant difference in tax treatment between owning the property individually or through an LLC, there is a difference in liability protection. Owning a property individually can subject the foreign buyer to lawsuits in the U.S., whereas, an LLC can protect the foreign buyer’s assets outside those owned by the LLC from liability. Purchasing additional liability insurance is also an option.
If a foreign person wishes to purchase the property individually, they can create an irrevocable trust to hold the property. An irrevocable trust will avoid estate tax when the foreign person dies. In addition, a trust can provide similar privacy protections to a corporation.
While changes to title are possible after closing this generally involves additional costs and, in the case of non-residents, FIRPTA withholding where 10% of transfer value is held pending IRS review.
There is no "one size fits all" and costs vary significantly between the various types of ownership - call us to discuss your options...
If you missed paying your taxes, don't panic!!! Here are the links to some of the Central Florida Tax Collector's sites where you can locate and pay your bill(s).
POLK - TAXES & ASSESSMENTS
LAKE - TAX SEARCH
ORANGE - PROPERTY TAX SEARCH
OSCEOLA - TAX SEARCH
Remember, if you have a US loan then your lender probably submitted your payment in November. If you purchased property after January 1st 2015 then you will not receive a property tax bill until November 2015.
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