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Everything to Know about Taxes on Foreign Real Estate













Everything to Know about Taxes on Foreign Real Estate

Taxes are something that we never actually like to pay and never understand too much in the first place.
Taxes can be quite complicated because you don't always know exactly what you have to pay.
Also, what are the types of taxes that you will have to pay?
Everything can get so confusing sometimes that you won't even be aware of where to start and what to pay.
If you are thinking of investing in foreign property, here are the most important things you should know about the taxes.

Do You Need to Pay Taxes on Foreign Property?

Under average circumstances, when you buy a property (no matter if it is domestic or foreign), you won't have anything reported on the ex-pat taxes from the U.S. - not unless you have a Homebuyer Credit set for that year in particular.
That being said, when you sell the property, you will need to report the resulted gains or losses on the ex-pat taxes of the taxpayer.
How you use the property overseas will also determine the taxes you pay.
If you live on the property, for example, you may benefit from a mortgage interest deduction.
That being said, if you rent out the property, you may have to pay taxes based on how long you give the property away.
The more you use it for rental purposes, you may have to pay off quite a bit in taxes, premises liability, and so on.

Types of Taxes Involved

Before you decide to invest in real estate, you need to keep in mind that there are four taxes that you may have to pay off.
This depends on the property and the purpose for which you bought it, but they should still be kept in mind:
Transfer Tax - Typically, when buying property overseas, you may have to pay off something called a transfer tax.
In some cases, that tax is recoverable, as it is covered by the seller - but in most cases, it's the buyer that will have to cover these transaction costs.
Income Tax - Are you planning to rent out the property? Then you will likely have to pay income tax as well.
Not every country requires you to pay these taxes, and it also depends on how long you rent the place out - but it is still worth keeping in mind.
Property Tax - Depending on where you are, you may or may not have to pay property tax. Sums may differ as well.
For example, in the U.S., you may need to pay significant amounts, whereas Belize has you paying $10 for a $100,000 property.
Capital Gain Tax - Americans are typically liable for capital gain tax, but that might depend if you are buying the property in another country.
Talk with your tax preparer, and see exactly how much you will have to pay in capital gain tax.

Taxes are not always completely easy to understand, which is why you should work closely with a lawyer.
This way, you will know that everything was efficiently addressed.




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