Foreign Investor Archives - Coral Gables Real Estate Law Offices of Jacqueline A. Salcines

REAL ESTATE ATTORNEY – MIAMI

With its single taxation for residents, homestead exemption protection, booming tourism ,and wonderful climate, Florida has long been a desirable state for real estate investors.

Florida is also a tax-friendly state for real estate investors, providing one more reason to put your property investment dollars in the Sunshine State. Here’s what you need to know about Florida’s tax laws as a real estate investor, as well as an overview of how Florida’s tax system works for real estate investing.

Florida Income Tax on Real Estate Investing

Alongside Nevada, South Dakota, Washington, Wyoming, Alaska, and Texas, Florida does not collect personal income tax. That doesn’t mean you won’t pay income tax to the IRS for federal taxes, but it does mean you will pay less overall income tax in Florida. Even if you don’t live in Florida, you can benefit from the state’s lack of income tax as a foreign investor in real estate. Here’s how:

When conducting real estate transactions, collecting rent, or earning commercial property dividends from a Florida real estate investment, you will be taxed at the state’s franchise rate if you operate as a “C” type corporation. You can get around this by filing as an “S” corporation, but there are still easier ways to escape business taxes in Florida.

#1 Sole Proprietorships and Partnerships

Sole proprietorships are defined as businesses owned by a single individual, and in Florida there is no distinct business or corporate tax on sole proprietors. And since there is no income tax leveraged on individuals in Florida, you can invest in real estate as a sole proprietor without paying state income tax.

The same goes for partnerships; Florida does not leverage a state-specific tax on partnerships. And while most states tax the revenue generated from partnerships, Florida does not. This means you can invest in Florida real estate as either a sole proprietor or partnership without paying state income tax.

#2 LLC

Though perhaps a little more confusing, operating as an LLC in Florida can still afford real estate investors the benefit from Florida’s lack of an individual income tax. But, the LLC has to be setup properly to enjoy this tax benefit.

To form an LLC in Florida while living in another state, you’ll need an agent living in Florida to serve as a “resident agent”. If your LLC is composed of multiple members, it will usually be treated as a partnership for tax purposes, meaning you will not pay state income tax. Furthermore, if you are the only owner in your LLC, it will be treated as a “disregarded entity”, and you won’t pay state income tax.

Be aware, though, that it’s possible to setup an LLC so that it’s treated as a corporation under Florida’s tax code, which would result in paying Florida taxes. So, use a professional to setup your LLC to avoid paying Florida income tax.

Watch Out for These Complications

Florida’s lack of a personal income tax makes it a great place for real estate investors to conduct business. However, there are a few ways this picture can be complicated by external factors.

First off, depending on what state you live in, your state may leverage an income tax on income generated out of state, even if that income comes from a non-taxable legal entity in Florida.

Similarly, if the legal entity that you’ve formed to operate in Florida conducts business in other states, you may fall victim to “nexus” based taxes. “Nexus” exists when a business operates in more than one state, and the rules and regulations for businesses that fall into this category are extremely complicated. Again, consult tax and legal professionals before doing anything relating to taxes and real estate investing.

Things To Consider Regarding Out-of-State Real Estate Investing

From a tax perspective, there are numerous benefits for real estate investors in Florida. But if you live outside of Florida, there are logistic concerns to keep in mind.

Anytime you invest in real estate outside your home area, you need to do a great deal of out-of-town research to learn where to purchase investment properties. Plus, from a financial perspective, managing properties and tenants from long distance can be impractical, besides dramatically cut into your profits.

The solution, then, is to use a real estate attorney and local realtor.

There are major tax benefits for real estate investors in Florida, compared to most every other state.

If you are interested in real estate investing in Florida, consult with us today to learn how you can take advantage of Florida’s tax laws. Hopefully, you can significantly increase your profits by avoiding state income tax in Florida.

By navigating around the tax laws and benefits of investing in Florida, we are here to help you.

We offer free phone consultations, and a no cost review of your case.

Call us today. 305.669.5280 and see how we can help you.

About the Author:

Jacqueline A. Salcines, Esq is the Owner and Managing Partner of the Law Offices of Jacqueline A. Salcines, P.A. Real Estate and Business Law Group. With over 20 years experience including holding a dual degree in Accounting, her broad knowledge of REAL ESTATE LAW serves to aggressively protect and defend our firm’s clients, foreign investors, real estate buyers and sellers.

Call us today to set up a free consultation to discuss your specific needs. We are here for you!

Main office 305 | 669 | 5280. Or email the attorney directly: J.Salcines@Salcineslaw.com

TRUST | COMMITMENT | RESULTS

Jacqueline A. Salcines

JACQUELINE A. SALCINES, ESQ.

706 S. DIXIE HIGHWAY

SECOND FLOOR

CORAL GABLES, FL 33146

TEL. 305 669 5280

Email: J.Salcines@Salcineslaw.com

The Miami Association of Realtors ranked Brazilians as the “top foreign consumer searching Miami properties in May 2013”. Source: Miami Association of Realtors, The Miami Herald Sunday, July 7, 2013. Next in line were Canada, Colombia and Venezuela. What this equates to is a large number of foreigners investing in Miami Real Estate and depleting inventory of homes in South Florida.

While the majority of foreigners are smart enough to hire real estate lawyers to assist them with their purchases, far too many fail to do so and this failure to plan can result in costly mistakes. So how do foreigners avoid the pitfalls of foreign investing in the United States? First, it is important to understand who is considered a foreigner. A foreigner is any person that is neither a citizen nor a green card holder in the United States.

For a foreign buyer, there are no special rules or regulations that must be carried out to purchase property. They simply put in a contract, produce the funds and close. If rent is collected, they must file income tax returns, a 1040NR, to declare the income and expenses as well a pay any applicable income tax.

The implications arrive at the time the foreigner is ready to sell! Foreign nationals that sell real estate in the United States face heavy tax implications and are subject to FIRPTA. If there was no legal guidance prior to buying, then there is little that a lawyer or tax professional can do to safeguard the foreigner. The damage is done.

However, with the assistance of a real estate lawyer and accountant, and a little planning, many of the taxes can be avoided entirely. As a real estate and business lawyer, as well as an accountant, I see it far too often. The closing takes place and a year later, when its time to sell, the damage is done. At this point, shock takes over when these foreign sellers are told what they will have to pay the Internal Revenue Service.” -Jacqueline A. Salcines, Esq., Attorney at Law, Accountant. Therefore, the smart and savvy investor will hire an attorney to lay the foundation to structure the investment so as to avoid taxes and penalties.

The following are just a few of the items we can provide advice on that foreigners should consider prior to investing:

How to take title – As a foreign investor without either U.S. Citizenship status or residency status, foreign property buyers face quite a hefty tax upon the sale of their property. This can be avoided by either purchasing in the name of an LLC or structuring the purchase in a different manner. While the capital gain is may only be taxed at 15%, if the foreigner dies while owning the real estate, the entire value in excess of $60,000 may be taxed at rates as high as 45%.
FIRPTA Considerations. The Foreign Investment Real Property Tax Act also requires settlement and closing agents to withhold 10% of the gross sale proceeds of foreigner, held at the time of closing, and send to the Internal Revenue Service. This insures that the IRS collects an amount if the foreign property owner fails to file an income tax return. Properties under $300,000 may be exempt altogether if certain conditions are met
EB-5 Visa. The EB-5 category was created by Congress in the Immigration Act of 1990 to encourage the flow of foreign capital into the United States in order to create jobs for U.S. workers. Under this Visa, the foreigner that invests a minimum of $500,000.00 can immediately obtain green cards for himself and his immediate qualifying family members. This is also a consideration that foreigners can consider.

Although there are many rules and regulations to consider when purchasing and disposing of real property by foreigners in the United States, they do not have to be confusing. Whether you are buying or selling, consult with a real estate lawyer and tax professional to ensure that you do not make any mistakes, and your investment is a sound one.

At the Law Offices of Jacqueline A. Salcines, PA, attorney Jacqueline A. Salcines is both a real estate lawyer, investment consultant, as well as an Accountant. We stand able to assist foreigners to navigate the maze of foreign investing. Call us today for a free consultation, or email us with any questions you may have. J.Salcines@salcineslaw.com

Jacqueline A. Salcines, Esq.

305 | 669 | 5280

TRUST | COMMITMENT | RESULTS

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FLORIDA REAL ESTATE TAX ADVANTAGES FOR FOREIGN INVESTORS – REAL ESTATE LAWYER MIAMI