Hi guys,
I'm putting in a bid for a house tonight! And really wanting to get on top of the taxation issue.
I have looked throughout this forum and also checked the IRS website but still having trouble comprehending fully what tax will do to cash flows.I have a few questions that I would genuinely appreciate any help or advice with:
1. Is gross rental income taxed at 30%? Or is it the same as in Australia where it is taxed after all expenses?
The reason I ask is because the IRS website I have found quite confusing and leads me to believe it is at 30% of gross rental income however this seems very harsh. The link is http://www.irs.gov/businesses/small/international/article/0,,id=129631,00.html
2. If it is true that you get taxed post all expenses> I have read that you can depreciate the house for 27.5 years but are you able to depreciate any other aspects of the house ie fittings, appliances which are connected to the property, AC etc?
I am trying to build a really accurate cash flow model so that I can work out whether I can afford to buy another property but I really need to comprehend this before I do so!
I would truly appreciate some help with this!!
Many thanks,
Stuart
G'day Stuart.
I know a little about investing in the US of A and know that there is presently NO double dipping on the tax obligations. You either pay the 30% taxation in the US or you pay it in Australia – NOT both! It may help to have a look at a collegue of mine's website at http://www.investuspropertygroup.com.au you may get your answers there.
CHEERS!
TCHi Stuart,
I suggest that you contact James Simango at http://www.USTaxCentral.com James is a US & Aust CPA and can give you advice from both the US side of affairs and how it impacts on you in Australia.
Stuart,
As I understand it, you will pay 30% withholding tax on the gross rental income UNLESS you are registered with the US Tax system. i.e. you have an ITIN (and an EIN if you are using an LLC).
I suggest you get a US CPA accountant to set up your entities etc properly to ensure you avoid this withholding tax.
Cheers.
Stuartwn,
I'm investor myself here in Australia, even I know a bit of our taxation, I hired a tax accountant to sort out the legal matter about tax. I recommend you take this path as well, that is why they called 'the expert'.
Focus on investing, leave that stuff to the expert….you won't regret it.
All the best!
Hi Stuart
Did you get your answers to your questions??
Did you go with an "expert" and if so, which one?
cheers
Gary
You can do all the paperwork yourself and also file the tax return, and if you know what your doing and have the proper set up initially, you can get away with it, but if your not sure or do something wrong, they can come down quite heavy on you.
For most investors, you really do need to talk with someone qualified, there are a number of accountants that profess to know all about the US Tax system, and you can be caught out, or, you can try to find a US CPA.
We have as part of out team, a US Tax Registered Agent, who is from L.A and now lives in Melbourne, and has been looking after not only some of the major celebrities with their tax, but for over 20 years has also been helping Property Investors, and now over here.
The difference is that a CPA is normally only state registered, whereas the Tax Agent is registered on a federal level and can operate in all 50 states, and has a direct link to the IRS.
Jayman,are we able to access your tax agent? Or is this only for those who use your services?
I've had a number of requests for that, normally, there is a registration fee which includes a half hour phone consultation as well as opening a bank account, etc. Then if you take it further, you then pay seperate fees direct for service, but they are very nominal, certainly not rip off fees.
If you would like to contact me, I would be happy to work something out.
Where are you located?
Jeff
Hey Guys
Honestly, I had to post this even if it does come across as 'negative' or 'argumentive'.
Let's all think back to when we first started working and when we all had to lodge our first tax return. Some of us may have done it using a public practice, others may have used a CPA who was recommended by family or friends and others may have done it themselves via the ATO's website. I am sure some didn't file any return! Now, how many of us ever paid a 'registration' fee just to get talking to your accountant for the first time?
Honestly, this is getting beyond ridiculous. I understand the concept of making money and I am a firm believer in getting what you pay for however what I am seeing now in these forums and through my own independent research is a select number of "Professionals" taking advantage of people.
Even if your accountant charges say $250 per hour… why am I seeing Aussie accountancy firms charging $350 + to submit a W-7 application for an International Tax Identification Number? It takes all of 15 minutes to fill out.
Registering an LLC in America would have to be one of the easiest forms I have filled out in my lifetime. As is the EIN (Employee Identification Number) and so forth. I'm the type of guy who would most likely pay somebody to do this for me if I can see the overall value in it however when somebody is charging me more than 40% of their normal hourly rate for something that takes them no more than 15 minutes than of course I am going to ask questions!
I am speaking generally because of course there are more complex situations where you cannot do it all on your own however do your due dilligence first and make sure your not getting taken advantage of… it seems to me that there is a select number of Aussie based accountants who do understand the US tax system (some even US registered tax agents) however are charging what I see as 'over the top' rates.
Interested to know anybody else's experiences on this topic and if you think my comments are fair or 'out of school'?
here him, hear him!
Well said YGWYPF
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