Tax Returns

Foreign sellers of real estate must file both a (one-time) federal and state tax return in the calendar year after the sale. Foreign parties must file an IRS return, even if they received their entire refund already via the 8288-B (withholding certificate) process. DIRECTS regularly prepares IRS and state (usually California) tax returns for foreign sellers of real estate.

Foreign owners of US real estate who earn (any) rental income by renting out their US real estate must file an annual US and state tax return. They must file both returns, even if the foreign owner has no “net” income (after allowable expenses are deducted), and therefore owes no actual income taxes. In the rental area, foreign owners should be careful to first remove the federal and state (if any) withholding tax obligations, which are placed on their tenants and/or property managers. DIRECTS can help remove the foreign owner of US real estate’s IRS and (if any) state withholding tax obligations. Both the IRS and California withholding tax obligations can easily be removed (so the foreign owner can receive the entirety of the rental income without violating the respective tax laws). Finally, DIRECTS can help foreign parties with their US and state (usually California) annual tax returns, even if those returns lead to no actual income tax being owed.