Property Tax – USA

Taxes in the USA are, as in most countries, a complex area and buyers should consult a tax expert when purchasing their property. Below you will find a general overview of the system.

Taxes vary from state to state, so it is essential that homebuyers are well informed before they decide on their purchase. Tax advisors can legally assist in lessening the tax burden for foreign buyers of overseas or off-shore properties. Our advisors are available to help you avoid the major pitfalls and gain maximum benefit from your property investment.

Tax on Rental Income

All rental income is subject to US tax, which is paid locally. The standard withholding tax rate of 30% is applied to rental income.

In some states a double taxation agreement exists between the state and the UK. Florida is one of the states where this agreement applies. Tax on rentals can be very low if handled correctly as there are generous allowances which include mortgage interest relief and the cost of inspection flights

Capital Gains Tax

Capital gains tax varies, but if the property is owned for more than a year, then the rates will be roughly between 8% and 15%.

Sales Tax

In most states sales tax is not imposed on the purchase of property. However in 36 US states a real estate transfer tax of between 1% and 5 % is charged on the assessed value of the property.

Inheritance Tax

Estate and gift taxes deal with the transfer of property, either while you are alive or upon your death. Both federal and state taxes apply, with great differences between states in how your estate is taxed upon your death.

Stamp Duty

In most states, when a property is paid for by a mortgage, a charge is made known as Documentary Stamps based on the amount of the mortgage. For example, in Florida, this is set at the rate of 35 cents per $100 of mortgage. In addition, you pay an Intangible Tax at the rate of 0.002% on the mortgage amount. Therefore, if you have a $100,000 mortgage, you pay $350 Documentary Stamps and $200 Intangible Tax. However, neither of these taxes apply if you pay cash for your property.

Local Tax

Local taxes are paid in the state or county in which your property is located. The tax amount is on the assessed value of the property (which is likely to be about 75% of the market value). Taxes vary in amount depending on the local facilities. In 2006 ten states decided to review local taxes with a view to decreasing them to more affordable levels.