Reduction OF Taxes Through Foreign Purchasers of Real Estate in US
Foreign investors are more inclined into purchasing residential properties and investing on real estate due to the low rate of interest and stability in the market place of United States. However these foreign investors are not always made aware regarding the probable tax information related to their property acquisitions.
On the transfer of a property on account of death of an individual involves a US federal estate tax. For foreigners and non-residents of US they are required to pay taxes on all property owned by them. This US federal estate tax they need to pay is known as U.S Situs Property. This involves property and real estate, shares issued by corporations in US, jewellery, assets or any physical wealth. If a foreign individual having a property valued over $60,000 expires then the 47% of the property goes to the federal government.
However such taxes can be reduced with a proper planning. One can balance the amount of payment of such taxes by investing on life insurances. When there is an increase in life expectancies there is a fall in life insurance costs. Hence the total coverage is quite less expensive.
Another way foreign investors can reduce federal estate taxes is to decrease the value of he property. The estate taxes are valued on the market value of the property at the time of death of the owner Hence property can reduce its market value by leveraging that with a non-recourse mortgage.
The proper investment on life insurance and leveraging property in a non-recourse mortgage can eliminate estate taxes to a great amount. Another way to reduce such taxes is to use a non US corporation for acquiring property. This is applicable to those non US residents who have not yet bought the property. The US Situs property does not involves shares of sticks on properties issued by corporations incorporated outside US.