Offshore Real Estate Ownership

Coming Into Compliance with the IRS and FBAR Reporting Requirements

Do you own real estate or real property outside of the United States? Are you a US taxpayer?  If so, there are specific offshore real estate ownership reporting requirements you should be aware of, even if you have not earned any income from your property this year.  Most offshore real property investments are held in a foreign trust or a foreign corporation.  As such, these assets must be reported on IRS Form 8938, and in other locations of your US tax return.

If you purchase or own offshore real estate or real property in your own name (versus in a corporate entity or trust) you may not be required to list that asset on IRS Form 8938. However, there are several complex rules relating to the valuation of the property, income generated, and the tax basis of the asset in the event of a sale.  If a foreign bank account is opened for the acquisition of the property, or is utilized for income, expenses and related maintenance, and the balance exceeds $10,000 at any point in the calendar year, it will be necessary to disclose the account on your FBAR.

Many US residents who are not citizens (and who are US taxpayers) own property in their country of origin. This can be a family estate, or simply a home or property they owned prior to coming to the United States.  You may be required to disclose your offshore real estate ownership interest in this property to the IRS, and must ensure that all activities, income and expenses are properly included in your own tax return.

US taxpayers, including citizens and residents, who own an interest in offshore real estate, foreign bank accounts or investments face steep financial penalties and potential criminal prosecution if they do not comply with IRS reporting requirements including FBAR, and other components of FATCA. The experienced international tax attorneys at Allen Barron are uniquely positioned to provide sound counsel and advice across a broad spectrum of associated services including:

  • Taxation and Offshore Tax Reporting Compliance
  • Accounting and Bookkeeping
  • Tax Preparation

If you own a home, land, real property or an interest in real estate outside of the United States we invite you to contact us for a free and substantial consultation at 866-631-3470. Learn about the protections of the “attorney-client privilege” and how the blended services of Allen Barron’s experienced professionals save you time and money while reducing your exposure to US tax burdens and potential criminal tax exposure.

How is Foreign Real Estate Ownership Taxed?

Generally speaking, US taxpayers who sell offshore real estate interests or real property are going to have to declare the associated proceeds to the IRS and pay appropriate taxes. US taxpayers are taxed on their worldwide income, and there are very few offshore tax breaks for capital gains and the type of passive income that is associated with real estate and real property. Therefore, passive income and capital gains are taxable as earned, regardless of where you reside or where the property is located if you are a US taxpayer.

Basically, offshore real estate is now taxed the same as the proceeds from domestic real estate transactions, except for depreciation. Tax rates and deductions for expenses are handled in the same manner as property transactions here in the United States.

There are a few exceptions to these rules. If you are considered to be an “active” real estate investor, purchase real estate from a retirement account or are a real estate professional, the taxation rates and reporting requirements may be quite different.

If there are real estate related taxes in the nation where the real property is located, the US will allow you to claim a “Foreign Tax Credit” that is basically a dollar for dollar deduction for taxes paid in local jurisdictions outside of the United States.   If the foreign tax rate exceeds the US tax rate for the transaction, you may owe zero US taxes. If the foreign tax rate is less than the US tax rate, you would basically owe the difference between the amount you paid to the foreign sovereignty and the amount you owe under US tax laws.

Contact San Diego International Tax Attorneys For Advice Concerning the Ownership of Real Estate or Real Property Outside of the United States

Do you own a home, land, real property or an interest in real estate outside of the United States? If so, it is important to come into compliance with FATCA and FBAR requirements.  The experienced international tax attorneys at Allen Barron invite you to contact us for a free and substantial consultation at 866-631-3470.  Ask about the important protections of the “attorney-client privilege” and how the unique tax, accounting and legal services available through Allen Barron simplify your life while reducing the time and cost of managing your investments and associated taxation.