Tax Advisory
Understand your US tax obligations as an international real estate investor in Miami — FIRPTA, capital gains, rental income, and LLC structures explained.
FIRPTA
The Foreign Investment in Real Property Tax Act withholds 15% of the sale price when a foreign national sells US real estate. Strategies exist to reduce or defer this withholding.
Capital Gains Tax
Profits from the sale of properties may be subject to a 15–20% federal tax. Properties held for more than 12 months qualify for more favorable long-term rates.
Rental Income Taxation
Income generated in the US is subject to federal tax. With the right structure (LLC or Individual), you can deduct expenses such as management, insurance, maintenance, and depreciation.
Optimal Legal Structure
The choice between an LLC, corporation, or personal ownership directly impacts your tax burden. Each structure carries different tax and estate implications.
How Taxes Work for Foreign Investors in Miami
One of the most important things to understand is that US residency or citizenship is not required to buy real estate in Florida. However, foreigners who own US property and generate income from it are subject to US tax law — specifically, federal taxation on US-source income.
There are two main taxable events for international real estate investors:
- Rental income
- Capital gains
Tax planning before the purchase is essential. The ownership structure you choose — Individual, LLC, Corporation — directly determines how much you pay, when you pay it, and what deductions you can claim. Working with cross-border tax advisors from the start of the process can save tens of thousands of dollars over the life of the investment.
FIRPTA Explained for Foreign Investors in Miami
FIRPTA — the Foreign Investment in Real Property Tax Act — is one of the most misunderstood aspects of investing in US real estate for international buyers. Under FIRPTA, when a foreign seller disposes of US property, the buyer must withhold 15% of the gross sale price and remit it directly to the IRS.
Key points about FIRPTA for foreign investors:
- Applies to foreign sellers, not buyers — the buyer is the withholding agent
- The 15% is a withholding, not a final tax — the actual liability may be lower
- Exceptions exist for transactions under $300,000 used as the buyer's primary residence
- Sellers can request a withholding certificate from the IRS to reduce the amount withheld
- Filing Form 1040-NR can result in a refund if the actual tax owed is lower
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US Rental Income Taxation for Non-Residents
Foreigners who earn rental income from US properties must file Form 1040-NR (US Nonresident Alien Income Tax Return). You have two options for how that income is taxed:
Gross taxation (default)
- Flat 30% tax on gross rental income, with no deductions
Net election (recommended)
- Based on net income after deductible expenses, using standard graduated tax rates
With the net election, common deductible expenses include:
- Property management fees
- Insurance premiums
- Maintenance and repairs
- Depreciation (residential property is depreciated over 27.5 years)
- Mortgage interest (if applicable)
Most investors benefit significantly from the net election. Use our ROI Calculator to estimate your net rental income before and after expenses.
Capital Gains Tax on Miami Real Estate
When you sell a property in Miami, capital gains tax applies to the profit (sale price minus your cost basis). The rate depends on your holding period:
Short-term gains
- (less than 12 months): taxed as ordinary income — up to 37% federal
Long-term gains
- (more than 12 months): 15–20% federal tax rate for most foreign investors
Florida is one of the most tax-advantaged states in the US — it imposes no state income tax, which means capital gains are only subject to federal rates. This is a significant advantage compared to states like California or New York.
Holding your property for at least 12 months before selling can substantially reduce your effective tax rate. Strategic timing of the sale — combined with the right ownership structure — is a key element of any exit strategy.
Should You Buy Through an LLC or Personally?
Using an LLC is one of the most recommended structures for foreign real estate investors in Miami — but it is not a one-size-fits-all solution. Here are the factors to consider:
Asset Protection
An LLC shields personal assets from lawsuits related to the property
Privacy
LLCs can provide an added layer of ownership privacy in public records
Tax Flexibility
A single-member LLC is a disregarded entity for US federal income tax purposes, simplifying your personal return
Estate Planning
Holding title through an LLC can simplify inheritance and reduce estate taxes for non-residents
The right structure depends on your country of residence, the tax treaties between your country and the US, and your investment goals. Investors from Colombia, Mexico, Argentina, and Brazil face different treaty implications.
Tax Planning Strategies for International Investors
Effective tax planning can significantly improve your net returns on Miami real estate. Key strategies include:
- Choosing the right ownership structure before acquisition (LLC, Corp, or Individual)
- Strategically timing the sale to qualify for long-term capital gains rates
- Depreciation deductions to reduce taxable rental income year after year
- Cost segregation studies to accelerate depreciation on property components
- Net income election for rental income to avoid the 30% gross withholding
- FIRPTA withholding certificates to reduce the 15% withholding at sale when the actual tax owed is lower
- Working with cross-border advisors who understand both US federal tax law and the tax laws of your home country
Frequently Asked Questions About US Taxation
Do foreigners pay taxes in the US when buying a property?
Not at the time of purchase — but yes once you generate income. Foreign investors are subject to US federal tax on US-source income, including rental income and capital gains.
What is FIRPTA and how does it work?
FIRPTA requires the buyer to withhold 15% of the gross sale price when a foreign person sells US real estate. This withholding is applied against the actual tax owed. If less tax is owed, you can receive a refund.
Do I need an LLC to invest in Miami real estate?
Not necessarily. An LLC offers liability protection and estate planning benefits, but it is not mandatory. The right structure depends on your goals, country of residence, and tax situation.
How is rental income taxed for non-residents?
By default, the IRS withholds 30% of gross rental income. However, you can elect to be taxed on net income at graduated rates, which is generally more favorable once deductions like depreciation and expenses are factored in.
What taxes apply when selling a property in Miami?
When you sell, FIRPTA withholding applies (15% of the gross sale price) and capital gains tax is owed on the profit. Long-term gains (more than 12 months) are taxed at 15–20% federally. Florida has no state capital gains tax.
Legal Disclaimer
The information provided on this page is for general informational purposes only. LATA Miami is not a legal, tax, accounting, or financial firm, and does not provide legal, tax, accounting, or investment advice directly.
Any information related to taxes, corporate structures, immigration, estate planning, or investment strategies should not be construed as personalized professional advice. Users should always consult with attorneys, certified public accountants (CPAs), tax advisors, or licensed professionals before making financial, tax, legal, or immigration decisions.
LATA Miami may collaborate with independent third-party professionals to assist its clients, but does not guarantee specific results or assume responsibility for services provided by third parties.
All real estate or business investment involves risk, and past performance does not guarantee future results.
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