Hello! I am a CPA here to assist you with your tax questions. My goal is to provide you with excellent service today.
How are you today?
I'm sure you do know that you would be taxed on the rental income in the US
and as a nonresident alien, 30% of the rent would need to be withheld unless you submitted form W-8ECI
I use a US LLC to buy rental properties. I have a EIN (Employer Indentification Number) filed with IRS.
Am I get double taxed?
Yes, but if the LLC is taxed as a partnership, the LLC effectively pays no tax, and you are taxed individually
The LLC has no tax if it is a partnership
You will file form 1065 for the partnership, and then with that you will get a K-1 for which you will use on your 1040NR
I treated the money the LLC used to invested in US rental properties, are borrowed from me. For the rent I collect on behalf of LLC, can I take the money out from the bank and pay interests and principles to me immediately?
You can pay yourself back, yes - but you will still owe US income tax on the rental income.
No matter how you structure the business, an LLC, corporation, anything - all will pay tax.
What is the rate of my different tax bracket? Such as portion between 0 to $50,000 pay 17%? portion between $5000 to $10,000 pay 23%?
If you do not fill out form W-8ECI then it is 30%
if I fill out W-8ECI, what's the rate in different brackets?
Let me check that for you as you are a nonresident alien
I found for a US residents, portion of $0-27,000 is 15%; portion of $27001-45200 is 27.5%
That's not the tax brackets for US citizens.
They start at 10%
Your bracket would be the same as a US person for income effectively connected with a trade or business in the US
That's including federal tax and State tax?
Let me copy those for you
Are you married or single?
This is just federal tax, state tax will be in addition and I will get those rates for you
That's Federal tax. What's the New York State tax in different bracket?
And you would NOT need to file form ECI, because the LLC is a US company
but you would be taxed at those rates
someone told me under $4000, no tax. So that's not true.
No, if you have taxable income it is taxed.
So I do NOT file W-8ECI. Just want to make sure since you first told me I need to file W-8ECI.
You are a multi member LLC, correct?
not a single member?
Yes. Multi member elect to be taxed as partnership
Okay. The LLC is a US entity, so it would not need to submit form W-8ECI to the property management company
You would be taxed at the rates that I gave you, only if you are engaged in a trade or business in the US
If this is passive rental activity that you do not materially participate in, then you will be subject to a flat withholding tax of 30% on the gross rental proceeds
confused. You just told me I will be taxed as same as a US person, and you sent me the table of different tax bracket. Now you say 30% flat rate.
No, I am saying that if you have income effectively connected with a trade or business in the US you will be taxed at those rates
If you are doing nothing with the rentals, just owning them passively, then there's a different way you are taxed.
After my LLC buy those rental properties in US, how do I avoid to be a "passive rental activity"? I guess my LLC can not hold the rental property long and sit on the rent,
Are you going to participate in active management of the real estate?
You can do that even though you are non resident alien
I have to flip it. fix and sell frequently, that's the active activity, right?
What's the "active management" of real estate?
OK. You said rental properties...
if you are buying and reselling the properties, "flipping" them, then that's capital gains
is "capital gains" passive activity?
Capital gains is where you purchase assets with the intent to resell them
Renting is where you place a tenant in the home and collect rent
Capital gains for a nonresident alien are a flat 30%
Unless, you are participating in an activity that is effectively connected to trade or business in the US
If you are actively taking part in the investment - purchasing the asset, overseeing the work done on the asset, and not just buying the asset and letting others fix it up, then you would be conducting a trade or business in the US
If you are just investing your money here, and someone else is overseeing the repair and upkeep of these properties then it's not effectively connected
You said "oversee" (to be in charge of a group of workers and check that a piece of work is done satisfactorily). I know I am not allowed to work myself (including repairing and maintenance of those rental properties). You mean I should go to USA manage US workers there to repair, rennovate my LLC's rental properties. Am I allowed to be in USA to manage workers in USA?
so I can even do repair myself?
This is a series question. Each time I come from Canada cross boarder US boarder, the US Custom will ask me, and I say something like "tenant call me to repair the toilet leaking, I come to fix myself."
In New York State, am I allowed to collect rent from the tenant on behalf of the LLC? Am I allowed to file eviction on behalf of the LLC?
Yes you would collect the rent, but the check would be made out to the LLC. You could evict the tenant as well
Can my LLC partner and I file tax by ourself? If yes, which software do you recommend?
Yes, you could. You would have to use a software that can handle business returns
Have I provided you with excellent service today?
Yes. Thank you!