Top tax considerations when buying US real estate
Property in the US is often viewed as an excellent investment, particularly for high-net-worth individuals. But no matter what your domicile country, you will always be liable for property tax and federal and state taxes. And the issue is far from straightforward, as each state has its own distinct tax system. At Oryx World Portfolio, we have gathered a few pointers on three sought-after cities – New York, Miami and Los Angeles.
As per US tax foundation figures, New York ranks 11th out of the 52 states with a tax rate of 1.64% of the property value per year. Other things you’ll need to consider as a buyer are attorney’s fees, building application costs, which are upwards of $500, title insurance (upwards of 0.6% of the property) – and for high-end properties a mansion tax of 1% of the total purchase price for properties valued at $1 million or more.
Ranking 25th is Florida, with a tax rate at 1.06% of the property value per year, and with Miami closer to 1.5%. Other considerations are to allow 3-5% transfer fees (closer to 2% if you’re not taking out a mortgage) and title fees of around $300. As the buyer, you’re not liable to agent’s fees or purchase taxes. But, as in all states, capital gains tax is an issue – in Florida calculated at around 15% of the gain (profit) on the property.
California weighs in 34th on the property tax scale at a median 0.81% of the property value. Within LA County specifically, the range is between 1.08-1.15% of the purchase price. Property taxes are assessed annually and payment is made in two instalments. It is of particular note that once purchased, the property taxes will remain the same until re-financed or sold.
Commenting on buying property in the US, Sandra Miller, President at Engel & Völkers’ Santa Monica office, explains, “There are no annual state or federal income taxes due on a property that does not earn income. When you sell the property, the federal and state taxes are paid at the time of sale (approximately 24% on the profit).
“Also, make sure you choose a licensed realtor who has experience with the sale and purchase of the type of property you want to buy. While you don’t need to be a US citizen to own property, you might think about applying for a visit (non-immigrant) visa well in advance,” she adds.
On this and any other aspects of buying property in the US, Oryx World Portfolio will be glad to assist. Please call +971 4 4462200 for further information.
This article offers general information on purchasing a property in the USA. It does not constitute legal advice. Please consult a local law firm or property specialist for specific details.