If a nonresident considering gifting real estate property in the United States, it's crucial to understand the unique tax implications involved. Based in Carlsbad, California, I specialize in international taxation and provide consultation, tax planning, and compliance services specifically for nonresidents who own or are planning to buy property in the U.S.
Understanding Residency for Gift Tax Purposes
Residency for gift and estate tax purposes differs from the substantial presence test used for income tax, which is based on the number of days spent in the U.S. Instead, it hinges on domicile, which means having a permanent home in the U.S. The IRS considers several factors to assess intent to stay permanently, including:
- Your citizenship status
- How long you've resided in the U.S.
- Where you pay state income taxes
- Where you vote
- Location of your property ownership
Key Considerations for Nonresidents
Before gifting U.S. property, nonresidents should be aware of the tax rules and requirements to avoid costly mistakes. Many nonresident aliens invest in U.S. real estate without proper tax planning or rely on advice from tax professionals who do not specialize in international taxation.
Differences in U.S. Gift Tax Rules
U.S. gift tax rules are significantly different for nonresident aliens. For instance, U.S. persons have a lifetime exemption of $13,580,000 (as of 2024) for gift tax, but nonresident aliens do not have such an exemption. Consequently, the full value of a gifted house is subject to tax, with rates starting at 18% and increasing to 40% for amounts over $1,000,000.
Importance of Professional Advice
Non-U.S. citizens who own U.S. real estate need a clear understanding of the potential implications of U.S. gift tax rules. Consulting with an international tax professional can help nonresidents navigate these complexities and avoid unnecessary taxes based on their specific circumstances.
Contact Us
If you or someone you know is facing issues with gift or estate taxes, or other tax matters, please feel free to contact us directly at (760) 842-7885 or via email at info@usibts.com.
By understanding these critical aspects of U.S. tax law, nonresidents can make informed decisions and optimize their real estate investments.
Dennis Ovchinnikov, CPA
U.S. International Business Tax Solutions
2385 Camino Vida Roble, STE 107,
Carlsbad, CA, USA 92011
info@usibts.com
https://www.usibts.com/
Tel: +1-760-842-7885
Fax: +1-760-683-2208
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