Renting out property in the US: landlord guide

Costs of buying

• Buyers usually pay 2–5% of the price in closing costs: lender fees, title insurance, escrow, recording fees and, in some states, transfer tax.
• Property tax is charged by the county or city, commonly from about 0.3% to over 2% of the assessed value each year. Your county assessor's site shows the rate.

Buying as a foreigner

• There is no federal ban on foreigners owning US homes. Some states, including Florida and Texas, restrict purchases by people or companies from certain countries.
• Non-resident buyers can get foreign national mortgages, usually with 25–40% down and higher rates.
• You need a taxpayer number (SSN or ITIN) to file US tax returns on the rent.
• When a foreign owner sells, the buyer generally withholds 15% of the price under FIRPTA and sends it to the IRS.

Official guidance: IRS: FIRPTA withholding · IRS: Individual taxpayer identification number (ITIN)

How rental income is taxed

• US residents report rent and expenses on Schedule E of Form 1040, due 15 April, and pay tax on the net amount at their normal rates. Many states tax it too.
• Foreign owners: 30% is withheld from the gross rent unless you choose to be taxed on net income. To do that, give the tenant or property manager Form W-8ECI and file Form 1040-NR each year.
• Depreciation on the building (not the land) over 27.5 years lowers taxable rent each year; it is recaptured and taxed when you sell.

Expenses claimable against rental income

• Mortgage interest and property tax.
• Insurance, repairs, and property management fees.
• HOA dues, utilities you pay, advertising, and legal and accounting fees.
• Travel to manage the rental.
• Depreciation of the building and of appliances and furniture.

Tenancy rules and customs

• Security deposit limits and return deadlines are set by state law. Many states cap the deposit at one or two months' rent and require it back, with an itemised list of deductions, within 14–30 days.
• The Fair Housing Act prohibits discrimination in renting. Rent control exists only in some states and cities, such as California, Oregon and parts of New York.

Key dates

• 15 April, 15 June, 15 September, 15 January: Estimated tax payments if no tax is withheld from the rent
• 15 April: Form 1040 with Schedule E (also Form 1040-NR if you had US wages)
• 15 June: Form 1040-NR for foreign owners with no US wages
• Set by your county: Property tax, often paid in two instalments

Questions landlords ask

What is a good rental yield in the US?

It depends heavily on the market: gross yields of 6–10% are common in lower-priced Midwest and Southern cities and 3–5% in expensive coastal cities. Property tax and insurance take a bigger share of the rent than in most countries, so check the net figure with the rental yield calculator.

Can foreigners buy and rent out property in the US?

Yes. There is no federal ban, though some states restrict buyers from certain countries. Foreign owners are taxed on US rent and can choose to pay on net income by filing Form W-8ECI and Form 1040-NR.

How is rental income taxed for a foreign owner in the US?

By default, 30% of the gross rent is withheld. Most owners instead elect to treat it as effectively connected income, which lets them claim expenses and depreciation and pay tax only on the net amount.

Which expenses can I claim against rental income in the US?

Mortgage interest, property tax, insurance, repairs, management fees, HOA dues, utilities you pay, advertising, professional fees, travel to manage the property and depreciation.

When is US rental income reported?

On the annual return due 15 April (15 June for foreign owners without US wages), with estimated tax payments during the year if nothing is withheld.

Official sources

• IRS Publication 527: Residential Rental Property
• IRS: Taxation of nonresident aliens
• IRS: FIRPTA withholding