Anonymous
Anonymous asked in Business & FinanceTaxesUnited Kingdom · 2 months ago

How to pay tax in America, when you are living in the U.K.?

I don’t know if anyone can help. I have got a house in America (Ohio) which I have just recently bought. It is being rented out to a family who is paying rent but I know I’m going to have to start paying tax on it.

Does anyone know how I do this? I am also a U.K. citizen I don’t have any connections in America, apart from the house I just bought. Please help!?

6 Answers

Relevance
  • 2 months ago

    Property taxes are usually paid annually. If you have a mortgage, terms of your mortgage may include "PITI" - your monthly mortgage payment goes to pay principal, interest, taxes & insurance. The service company for the mortgage pays the taxes & insurance out of funds from your mortgage payment.

    You can hire an accountant, manager, or service company to collect monthly rents, and pay out mortgage (if any), property taxes, and insurance out of the rental income.

    You must file US income tax returns. Keep records of property acquisition costs, maintenance & repairs, property taxes, utilities, management fees, etc. You deduct expenses from income & pay income taxes on that income. If you have hired an accountant, manager or service company, they usually help with the annual income tax return, too. Compare services & costs from various providers, get references!!! Then select the provider who can do the best for you.

    Otherwise, you have to get your property tax bills & do funds transfer to pay taxes on time. Penalties for late payment can be very stiff! IRS does produce instructions for income tax returns (Publication 17), including instructions for the special form for income properties - but most people find US income tax system rules downright Byzantine & prefer to have a pro do it all, despite the expense. Then if any tax is due, you have to arrange to pay in US dollars.

    Do you have a US bank account for tenants to deposit rent? Pay taxes - property & income - along with other expenses, out of the US account. With "paperless" electronic banking, you may be able to pay everything online from home in UK. And it avoids foreign exchange transaction fees.

    • NA
      Lv 7
      1 month agoReport

      If the taxpayer does NOT elect to have his property taxed on a 1040-NR *and* the 30% of rent is withheld, they do not have a filing requirement. This is why some people don't make the election.

  • 2 months ago

    The city or town you own the house in should have your U.K. address to which they will send you the property tax bill. The local school district also taxes you. They should also have your address. When the title was issued to you, your name and address for tax purposes would be put on file in the local county records for this purpose.

  • Anonymous
    2 months ago

    Try this Facebook group.

    https://www.facebook.com/groups/moneyist/

    An accounting firm experienced in cross border tax issues can also tell you. The UK and the US does have a tax treaty so any taxes paid to the US IRS should be a credit on your UK taxes.

  • 2 months ago

    Accountant is the right suggestion, but in all reality, how are you managing the property? Are you using a property manager? What do you do when the heater goes out?

    Do you own the property in your individual name or did you setup an entity to own it (an LLC perhaps)? Why do I get the feeling your individual name...which any lawyer would have advised against...

    • Kaan2 months agoReport

      I own this by myself, it is in my name but I am using a property managing company to rent out the property for me? Is that not a good option?

  • How do you think about the answers? You can sign in to vote the answer.
  • NA
    Lv 7
    2 months ago

    Do your tenants know they are required to send 30% of their rent payments directly to the IRS? This mandatory withholding on FDAP income.

    Did your real estate agent tell you to get am ITIN? If you elect to be taxed the same way a US person is on real estate (as opposed to just paying 30%), you have to file, make an election, and deduct expenses, including depreciation. When you eventually sell, the depreciation is recaptured against the gain.

    https://www.irs.gov/individuals/international-taxp...

    as well as IRS publication 519.

  • Tavy
    Lv 7
    2 months ago

    Are there no Accountants in the City where you live? Try one of those instead of asking a bunch of strangers on here.

    • Tavy
      Lv 7
      2 months agoReport

      Retired Kaan. Plenty of time to do as I like.

Still have questions? Get your answers by asking now.