Up to here, every article in this series followed the same tune: the transparent LLC pays nothing in the US, taxation happens where you live. With US real estate, that tune stops, completely. Buy American houses through your LLC and you enter the one chapter where the US very much holds out its hand, three times in fact. If you know the three places, you can still invest very well; if you do not, you learn them from the tax authorities.
Place one: rental income is US income
US real estate income is US-source income and taxable in the US, LLC or no LLC; we flagged this exception to the zero-percent principle in the withholding tax article. You have two regimes to choose from: the brutal flat rate (30 percent withholding tax on the gross rent, with no deductions at all) or the civilized version, the net election under § 871(d): you treat the rental as a US business, deduct depreciation, interest, management and repairs, and pay tax only on the net profit at normal rates; the IRS describes the election here. With American depreciation rules, the taxable profit of a well-run rental is then often close to zero, but the price is an annual US tax return (1040-NR) on top of the LLC's 1120/5472, and depending on the property's state, state income tax on top: a house in Florida or Texas stays free of state income tax, one in California does not, and what counts is the state of the house, not the state of your LLC.
Place two: FIRPTA on a sale
On a sale, FIRPTA applies: by default the buyer must withhold 15 percent of the purchase price and pay it to the IRS as security for your capital gains tax; the rules are here. This is not an extra tax but a prepayment: the real gain is settled through the tax return and any overpayment refunded, and a withholding certificate can reduce the withholding in advance. But it is a liquidity event that belongs in every exit calculation, 15 percent of the price, not of the gain, and it fundamentally separates the US real estate exit from a stock sale, which stays tax-free for non-residents.
Place three: the estate tax trap almost nobody talks about
Now the part that never appears in a sales video: US estate tax gives foreigners an exemption of only 60,000 dollars on US assets, against rates of up to 40 percent; the IRS sets out the rules soberly. A 600,000-dollar house in a foreign owner's estate can therefore trigger a six-figure US bill, and a plain single-member LLC in between is not a reliable shield, because the authorities can look through transparent entities. Anyone investing seriously in US real estate therefore plans the estate level as well, from two-tier structures to insurance solutions; we cover inheritance and gifts in a separate article.
Why the LLC is still the default
After three warning signs, the perspective: there is still hardly any way around buying through the LLC, just for the right reasons: liability separation per property (the tenant lawsuit on house A does not reach house B, as a series structure once you have a portfolio), anonymity around the land records, clean US banking for rents and reserves, and a professional presence toward property managers and authorities. When buying real estate, the LLC is not the tax-saving tool, it is the liability and order tool, and you manage the taxes alongside it with your eyes open.
Your next step
When your first US property becomes concrete: order an LLC in the right state, and we will discuss the 1040-NR support at the same time. If a portfolio, financing or the estate question is on the table, book a consultation with Sebastian, held in English, before closing: one hour, honest feedback, 15-minute guarantee.
About the author
ZeroTax LLC is a service of Mount Bonnell Advisors in Austin, Texas.
Founder of Mount Bonnell Advisors, Austin, Texas. Has bought, rented out and sold US real estate himself, with all three places on his own account statements.
Book a consultation with Sebastian (held in English only)