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Pay less tax: Before buying, make a tax plan with the guidance of professionals
Buying a property in the USA is undoubtedly a solid and promising dollar investment. The state of Florida has been the most sought-after market for investors around the world, especially foreigners. However, many investors do not pay attention to the tax implications of the acquisition, making the purchase without any tax planning. After all, is it better to acquire the property through a company (PJ) or by the individual? What are the taxes in each of these purchasing modalities?
In this article we seek to clarify the main differences between acquiring by the individual and legal entity, as well as commenting on other tax details in the acquisition of real estate in Florida.
Beware of the inheritance tax
You may have heard of the so-called inheritance tax, or “causa mortis” transmission tax. This tax is due in the transmission of the property to the heir(s), in case of death of the owner. What few know is that the rate of this tax in the US can exceed 50% of the value of the good. It is a heavy burden on the heirs, but fortunately it can be avoided.
To avoid inheritance tax it is important to acquire the property through a non-American legal entity (non-US company), which must have a Corporation accounting treatment. Opening a company in Florida is an easy, fast and cheap process. It is even possible to open from other countries (without being physically present in the USA). However, it is not any corporate type that eliminates the application of the tax. There are several modalities of corporate structures that can be constituted for the purchase of a property. AMG Realty has a team of professionals (lawyers and accountants) who can guide you in choosing the best form of acquisition, according to the profile and objective of each investor.
The idea behind making the purchase by the legal entity lies in the fact that companies do not die. Therefore, the inheritance tax would not apply.
In most situations, AMG Realty’s recommendation is the purchase by the legal entity. However, there are situations where acquiring by the individual can be more interesting. We will address the subject in the next topic.
When should I choose to purchase in the individual?
When the investor’s goal is to buy to make a profit from the resale in the short term, then the option to buy in the individual becomes more interesting. This is because the capital gains tax in the US is 15%.
The only precaution recommended in this situation would be to take out life insurance in the amount of inheritance tax in the name of the heir in case of an eventuality.
For those who choose to buy from the legal entity with the aim of resale in the short term, taxes are more expensive. This is because depending on the corporate type of the company created, the tax can reach 35% (from 15% to 35%) on the capital gain. There is also no compensation in other countries in the same way as in the natural person. By bringing the value to another country` and passing it to the individual, the investor must also collect the 27.5% of IR in the lion card.
Warning: In this article we bring an overview of the tax impacts on the purchase of real estate in the US. This article should not be used as a substitute for guidance by industry professionals (lawyers, accountants, and real estate professionals).
