Selling Property in the USA as a Non-Resident: State Filing Requirements

Selling property in the United States can be an exciting venture, but for non-residents of the US, it also comes with certain tax obligations and filing requirements. If you're a non-resident who has recently sold a property or land in the US, understanding the state and federal tax obligations is essential to ensure compliance with US tax laws.

This blog post will explore the state-specific filing requirements for non-residents who have sold property or land in the US, including examples from various states such as California, Texas, North Carolina, Georgia, and Florida. We will also cover the necessary steps to apply for an Individual Taxpayer Identification Number (ITIN), which non-residents must obtain if they don't already have a US tax number (SSN or existing ITIN).

Additionally, we'll provide an example of a non-resident seller from the United Kingdom who sold land in Georgia.

Understanding the Basics: Tax Implications for Non-Residents

When a non-resident sells property or land in the US, the sale is subject to US taxation. Here are the main points you should know:

1. Withholding Tax on Sale of Real Property: The Foreign Investment in Real Property Tax Act (FIRPTA) requires a withholding tax on the sale of US real estate by non-residents. Typically, 15% of the gross sale price is withheld, but this can vary depending on the specifics of the transaction. This is FEDERAL TAX.

2. State-Specific Filing Requirements: In addition to federal requirements, each state may have its own filing requirements for non-residents who sell property within that state. This is STATE Tax that may also be due in addition to the FIRPTA tax.

3. ITIN Requirement: If you are a non-resident without a US taxpayer identification number (TIN), you will need to apply for an Individual Taxpayer Identification Number (ITIN) before filing your taxes. This number is used to track your tax obligations and report income. In some cases an existing ITIN may also require renewal when not used on a US tax return in the last 3 years.

4. Tax Filing: Non-residents must file a tax return with the IRS (Federal) to report the sale of the property and pay any additional taxes owed. You may be eligible for a refund if too much was withheld during the transaction. In addition a State return may or may not need to be filed if the state has an income tax filing requirement.

State Filing Requirements for Non-Residents Selling Property

The filing requirements for non-residents selling property or land can vary widely by state. Below is a table that outlines the general state-specific requirements for five key US states: California, Texas, North Carolina, Georgia, and Florida.

State	State Tax Filing Requirement	Withholding Requirement	Additional Notes
California	Non-residents must file a California Nonresident Income Tax Return (Form 540NR) to report the sale of property.	California requires withholding on the sale of real property by non-residents at a rate of 3.33% of the sales price or 9.3% of the gain, whichever is greater.	Sellers must also complete the California Withholding Exemption Certificate (Form 593) to claim exemptions.
Texas	Texas does not impose a state income tax, but a non-resident may be subject to federal taxes and FIRPTA withholding.	No state-level withholding tax. However, FIRPTA withholding still applies.	Non-residents must report the sale to the IRS and may need to file a federal tax return.
North Carolina	Non-residents must file a North Carolina Nonresident Income Tax Return (Form D-400) if they have taxable income from the sale of property in the state.	North Carolina requires a withholding tax of 4% of the gross sales price for non-residents.	Taxpayers can claim a refund if the withholding exceeds the tax liability.
Georgia	Non-residents selling property in Georgia must file a Georgia Nonresident Income Tax Return (Form 500).	Georgia requires a withholding of 3% of the gross sales price for non-residents selling property.	Sellers may apply for a withholding certificate to reduce or eliminate the withholding if there are losses or other deductions.
Florida	Florida does not have a state income tax, so there is no state-level filing requirement. However, federal taxes may still apply.	Florida follows the FIRPTA withholding rules for non-residents, which requires 15% withholding of the gross sales price.	Non-residents must report the sale to the IRS and file a tax return if applicable.

Example: Non-Resident Seller from the UK Selling Property in Georgia

Let's take the example of John, a non-resident seller from the United Kingdom who sold a piece of land in Georgia. Here’s a step-by-step overview of the process:

1. Selling the Land: John successfully sold a plot of land in Georgia for $500,000.

2. Federal Withholding tax: As a non-resident of the US, John is subject to FIRPTA withholding tax on the sale.

3. State Withholding Tax: Georgia requires a withholding tax of 3% of the gross sales price for non-residents. In John’s case, the withholding would be:

FIRPTA tax = 15% x $500,000 of the gross sales price = $75,000

Georgia state tax = 3%×500,000= $15,000

$75,000 is withheld from the sale proceeds and sent to the IRS.

And $15,000 is withheld and sent t the state of Georgia.

Tax withholding documents should be issued to John by the withholding agent. These are required when filing the US tax returns.

4. ITIN Application: Since John does not have a US tax identification number, he will need to apply for an ITIN to report the sale and file his tax return. John can apply for an ITIN through a Certifying Acceptance Agent (CAA).

5. Certifying Acceptance Agent: www.justbreve.com, is a trusted and recommended Certifying Acceptance Agent with 5-star reviews on Google. They specialize in helping non-residents like John obtain their ITINs and ensure the application process is handled smoothly.

6. Filing the Tax Returns: After the sale, John will need to file a federal tax return (Form 1040-NR) to report the sale and determine whether the withholding tax was sufficient. If more taxes are owed, he will need to pay the difference. If too much was withheld, he can request a refund. He will also need to file GA500 tax return for Georgia for the same transaction. Again either tax may be owed or a refund due.

Steps for Non-Residents to Obtain an ITIN

Non-residents without a US tax number must apply for an ITIN to file their taxes. Here’s the process:

1. Complete IRS Form W-7: This form is used to apply for an ITIN. It requires basic information such as your name, address, and reason for needing an ITIN.

2. Submit Supporting Documents: You will need to submit proof of identity and foreign status, such as a passport.

3. Use a Certifying Acceptance Agent (CAA): To help with your ITIN application, you can work with a Certifying Acceptance Agent (CAA). CAAs like Just Breve can help ensure that your application is complete and submitted correctly.

4. Processing Time: After submitting your application, it typically takes 6-8 weeks to receive your ITIN.

Conclusion

Selling property in the US as a non-resident involves both federal and state tax considerations. Each state has different requirements, and it's essential to understand these before completing a sale. For non-residents, obtaining an ITIN is a crucial step, and www.justbreve.com is a great resource for assistance with this process. Just Breve can also assist with the 1040NR and state tax filing.

Whether you're selling property in California, Texas, North Carolina, Georgia, Florida, or another state, make sure you comply with all filing and withholding requirements to avoid any penalties or complications.

Can Just Breve help?

Yes, we can. Just Breve is a US tax accounting firm, assisting non-US persons with their US tax filing requirements, including filing a 1040NR and obtaining an ITIN. We assist in applying for a new ITIN or renewing an existing ITIN. We are a certifying acceptance agent (CAA) and have a contract with the IRS to help with Form W-7 ITIN applications (and EIN applications). We have assisted several thousand applicants over the last decade with their Form W-7 ITIN applications.

E: info@justbreve.com 

T: 077255 87696

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