The income tax is not the only type of tax that may be potentially imposed on your U.S. assets.
Many foreign investors are poorly informed about the forms and the extent of wealth tax in the United States. Critically so, they lack the understanding of the differences in how certain aspects of the U.S. tax system are applied to them in contrast to the tax treatment of persons domiciled in the United States. The most stark difference is the amount of the lifetime estate and gift tax exemption that is afforded to an individual who is domiciled in the United States for the purposes of estate and gift taxation ($15 million) as opposed to the paltry $60,000 that is available to a nonresident investor. Upon death, depending on the totality of the circumstances, a real property located in the United States - and more broadly speaking an ownership interest in a U.S. real property - might enter into the deceased's U.S. estate, notwithstanding that the investor was foreign and that, perhaps, he or she has never placed one foot on the U.S. soil. The rate for the U.S. estate tax is very steep. Interest in the U.S. property is not the only class of asset that might be included in the U.S. estate of a nonresident.
The matters relating to estate and gift taxation are not addressed in the bilateral income tax treaties (one income tax treaty being a notable exception). Remedies are available in the bilateral estate and gift tax treaties; however, as of July 2026, only 15 countries had a valid treaty of this kind with the United States.
Apart from the estate and gift tax issues, an investment in U.S. real estate carries with it a host of other tax complexities.
Before you commit, you should learn about the available to you ownership structures and the respective impact they can have on your overall tax exposure, the tax related ins and outs of running a U.S. real property rental operation, and the potential tax consequences of divesting.
FIRPTA 15% Withholding
IMPORTANT DISCLOSURES
The presented here information is not intended to be “written advice concerning one or more Federal tax matters” subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.
The information contained herein is of a general nature and based on authorities that are subject to change. Moreover, the information is presented here for educational purposes and is not specific to any individual’s personal circumstances. As such, this information should not be used for the purpose of avoiding penalties that may be imposed by law. A determination as to how your specific circumstances may relate to the presented material should be made by means of a consultation with your tax adviser.
Cezary Tchorznicki, CPA LLC does not provide legal or investment advice.