How California Taxes Rental Income

Taxes in the United States

In addition, there are cities or municipalities that collect high tax rates or duties - e.g. Marco Island near Naples, Florida. This community has a very high property tax rate; Preferably millionaires live there.

With regard to taxes, a distinction is made between

  • Residents, i.e. people living in the USA
  • Non residents, i.e. people living abroad. This includes those who have been within the United States for less than 183 days in the past three years.

NO difference is made whether the taxpayers are "aliens" (legal foreigners) or American citizens. There are examples on the website of the Swiss-American Chamber of Commerce: www.amcham.ch

The following is only a brief overview of US taxes. As tax legislation is constantly changing, it is essential to consult a specialist!

Income tax

As in Europe, income is taxable in the USA. The income tax is - depending on the annual income - between 10% and 38.6% of the annual income. The maximum rate is reached with an annual income of 307,500 US dollars (as of 2002).

There are numerous ways to reduce income and you should definitely hire a specialist to do this. Up to an annual income of US $ 62,550 for a married couple assessed together, no taxes are paid in the USA. For children under the age of 18, this amount is $ 6,050. Further information on the maximum and minimum tax limits is available at www.irs.gov.

Medical bills, donations to political or charitable institutions are also included deductible such as repair work on or in the house, be it owner-occupied or rented.

value added tax

Almost every US state has a value added tax raised. This "Consumption Tax" (often also called "Sales Tax") is variable, i.e. it is determined by the respective state and lies between 0% (State of Delaware) and 8.75% (California and Texas) of the value of the goods. It is counted on the excellent price.

So don't be surprised if you have to pay more at the checkout than what is stated on the price label. Sometimes everyday necessities are exempt from sales tax, such as shoes or clothing in the state of Pennsylvania.

Tax incentives for property purchases

The Buying real estate tax-subsidized. If you sell a property within a period of 60 months, then $ 250,000 per person is tax-free, or $ 500,000 for a married person. The prerequisite is that the house or apartment was the seller's primary residence for at least 24 months within the last 60 months. If this is not the case, 15% "Federal Tax" is due on the profit (minus the tax exemption), plus local taxes, which are based on the state or municipality.

At Rental income In the USA of a foreigner living abroad there is a choice: either submit a flat rate of 30% of the rental income as tax (WITHOUT a tax return), or submit a regular tax return. More information can be found at www.irs.gov.

Taxes on real estate (comparable to the German property tax in Germany) are much higher in the USA than in Germany. Depending on the size and location, houses are due in tax of 8,000 to 10,000 US dollars per year, often well above that. In areas that have seen a building boom and rising real estate prices in the last few decades, more and more older residents are being driven out of their homes by the high property taxes: They can often no longer pay the very high property taxes.

At Non residents a "flat taxate" of around 30% is applied to income. Again, the following applies: Call in experts! Binding information on tax matters is available on the homepage of the American tax authorities Internal Revenue Service IRS at www.irs.gov.

Regulations for the self-employed

As entrepreneurially self-employed in the USA you need a so-called "Employer Identification Number", or EIN for short. Depending on the income, the tax must then be paid either quarterly or monthly. More information can be found at www.irs.gov.

Your personal tax return must be submitted annually by April 15th. be submitted to the tax authority IRS.

Providing answers in tax matters ...

The tax authority IRS has its own Publication for foreigners published with all important information. It's about the IRS Publication 519 ( US Tax Guide for Aliens). It can be found on the Internet at www.irs.gov.

Further important information on the subject of taxes in the USA can be found on the homepage of the US Embassy in Berlin at www.us-botschaft.de.

Here, in particular, all important questions are dealt with, such as deadlines that have to be observed, from what income one is taxable in the USA, which forms have to be filled out for which purpose, how real estate profits have to be taxed, etc.

The branch of the American tax authority IRS, which is based in Frankfurt at the consulate, also answers questions about taxes in the USA. It is responsible for the following countries: Germany, Estonia, Iraq, Iran, Italy, Yemen, Qatar, Latvia, Lebanon, Lithuania, the Netherlands, Austria, Poland, Romania, Slovakia, Syria, the Czech Republic, Hungary and the former Soviet republics.

There is a double taxation agreement between Switzerland and the USA, the exact text can be found at www.estv.admin.ch.

Finally, a CNN website listing the “Most Tax-Friendly States”: money.cnn.com

This article is an excerpt from Live and work in the U.S.

By Just Landed

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