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. A double taxation agreement exists between the USA and the Australia .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 held for more than one year, then the rates will be roughly between 8% and 15%.
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 obtaining a mortgage and the seller ensuring that the title to the property is “clean”. The buyer should be aware that the commitment to certain dates is binding. It is important adhere to dates and conditions set out in the agreement, otherwise the seller might take the opportunity to pull out of the sale, particularly if a better offer comes up.
Costs
The costs involved will vary according to factors involved in the purchase agreement and the type of loan the purchaser has applied for. A good rule of thumb is to allow between 3 and 5% of the cost of the property. Many of the costs involved with the loan application will have been paid for in advance. Typically the costs required on closing are the down payment, fees involved in setting up the loan (application fee, credit report, etc.), inspection fees, mortgage insurance, title insurance and stamp duty.
Title Insurance
Title insurance protects the buyer of real estate in the case where a situation arises in which the title to a property is clouded. This is when a person or entity has an interest in the property that was not found or disclosed at the time of sale. For example a lender may have a lien on a property that was not discovered for some reason. The title insurance protects the purchaser from any expenses or loss that may occur as a result of this defect in the title.
Taxes
Taxes in the USA will vary according to where you live and whether you are considered resident or non-resident for tax purposes. Local taxes are levied to cover education and other services. USA income taxes and capital gains taxes are fairly low, but inheritance tax needs good planning. It is essential to employ a professional to guide you through the tax system.
Surveys
In the USA this is called an Inspection Report and is an essential to have before buying a property especially as the buyer buys a property in the condition it is in at the time of sale. There can be no complaints or compensation for defects once the purchase is closed between buyer and seller. Do not expect the seller to make all the repairs you demand, make sure that this is included in the sales agreement before you sign, however Invest in USA has an excellent record of instructing inspections and agreeing these repairs as an addenda to the contract.
We are able to assist you in finding a certified property manager for your property through LetAssist . We ask that you be treated thoughtfully and with respect. That the property managers deliver quality property management services to you, your investment and your residents. That they will remain committed to high professional standards and ethics That they will remain committed to keeping your investment in good repair with minimal costs. That they foster good resident relations with an emphasis on resident retention.
The average fee for property management is 10%. Rents are collected and paid into your USA account, a statement is then forwarded to you monthly.
USpropertydirect will continue to assist you for 60 days after closing, ensuring a smooth transition for you. This is for your peace of mind.
