5 Mistakes Foreign Buyers Make

If you’re a real estate professional working with foreign buyers interested in investing in U.S. real estate, it’s vital that you’re educated about the potential tax issues they face. Foreigners considering investing in Florida real estate may be unaware of the myriad tax issues posed by the acquisition, ownership and ultimate disposition of U.S. real estate.  Often, they don’t realize a problem exists until it’s too late.

While it’s always advisable to refer foreign buyers to a specialist who can properly address tax issues, it pays to have a working knowledge of just what they are. Here are some of the common mistakes made by foreigners dealing with U.S. real estate.

Mistake No. 1 – “I don’t need to worry about estate taxes; I’m in good health.”

Even if you are young and healthy, it’s never too early to start planning for what will  happen to your estate when you are gone and how much tax your loved ones will have to pay.  The United States imposes an estate tax at a rate of up to 40 percent on the portion of a foreign individual’s gross estate (assets controlled by taxpayer) situated  in the United States that exceeds $60,000. The gross estate includes real estate as well as other assets such as stocks of U.S. corporations located in the United States.  Accordingly, a foreigner’s estate is generally subject to U.S. estate taxation if the foreigner dies owning U.S. real estate directly (and in certain cases, indirectly through an entity). If the foreign decedent owns the U.S. real estate jointly with another individual, the full value of the U.S. real estate is taxed except to the extent the surviving joint tenant can prove he or she contributed to the original purchase of the U.S. real estate.

A tax attorney and certified public accountant can work with a foreign buyer to ensure that he or she is fully aware of the tax consequences of buying U.S. property.

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