Can Foreigners Buy Property in the US? What You Need to Know
Foreign buyers purchased $42 billion in US residential properties in 2024, buying 54,300 homes with no legal restrictions. The simple answer is yes: Non-US citizens can buy any property in America with complete ownership rights.
You can purchase freely whether you’re an American expat considering a vacation home, investment property, or a foreign national looking at US real estate. The process is straightforward, but the tax implications require planning to avoid surprises and ensure you keep more money in your pocket.
Do I Need Special Documentation to Buy Property?
The documentation is refreshingly simple. You’ll need:
- Valid passport or government-issued ID
- Proof of funds (bank statements or financial records)
- Tax identification number (SSN or ITIN)
- Pre-approval for financing (if not paying cash)
You don’t need a US visa, green card, or any special permits. Your residency status doesn’t matter for property ownership.
What About Financing Options for Foreign Buyers?
Most international buyers face financing hurdles due to limited US credit history. Here’s what works:
Cash Purchase (Most Popular Choice) Many foreign buyers go this route to avoid complications and become more attractive to sellers.
Foreign National Mortgage Programs Some US banks offer these, but expect:
- Higher down payments (30-40%)
- Higher interest rates
- Extensive documentation
For American Expats: You may qualify for conventional financing despite living abroad. Your US citizenship often opens doors that foreign nationals don’t have.
Will I Actually Owe Taxes on My US Property?
The good news: When they file correctly, most Americans living abroad end up owing $0 in US taxes, and property ownership doesn’t change that reality.
Property Taxes
You’ll pay annual property taxes just like US residents. These vary by location but are predictable and deductible.
Rental Income: The Smart Way
If you rent out your property, you have two tax options:
Effectively Connected Income (The Right Choice) Make a Section 871(d) election to treat rental income as business income. This lets you deduct expenses like mortgage interest, property management fees, and maintenance. You only pay tax on net income.
FDAP Income (Avoid This) Without the election, you pay 30% tax on gross rental income with zero deductions for expenses.
Stop guessing. Download the expert guide now.
What Happens When I Sell the Property?
The buyer must withhold 15% of the sale price and send it to the IRS under FIRPTA rules. This isn’t your final tax bill – it’s a prepayment that you’ll likely get refunded when you file your return.
Reduced rates apply:
- 10% withholding if the property sells for $1 million or less and the buyer uses it as a residence
- No withholding required if the sale price is $300,000 or less
Capital Gains: Usually Manageable
You’ll pay capital gains tax on any profit:
- Long-term (held over 12 months): 15-20% federal rate
- Short-term (held under 12 months): Higher ordinary income rates
State taxes may also apply, but many states have no income tax or favorable rates.
Does This Affect My Annual Expat Tax Filing?
Property ownership doesn’t change your basic filing requirements, but it does add some forms:
- Report rental income on your regular Form 1040
- Use Form 2555 for the Foreign Earned Income Exclusion if you qualify
- Consider Form 1116 for Foreign Tax Credit if you pay foreign taxes
- File Form 8288 when you sell (buyer’s responsibility)
Key Point: The Foreign Earned Income Exclusion (up to $130,000 for 2025) and Foreign Tax Credit that protect your regular income continue working exactly the same way.
Are There Special Rules for Different Types of Buyers?
US Citizens Living Abroad:
- Keep full estate tax exemption (over $13 million)
- Can often get conventional financing
- Same annual filing requirements as before
Non-US Citizens:
- Estate tax exemption is only $60,000 for US property
- May face financing challenges
- Different treaty benefits may apply
What Should I Do First?
Before you buy:
- Get pre-qualified for financing or confirm cash availability
- Research local property tax rates
- Consider how property fits your overall tax strategy
- Connect with a real estate agent experienced with international transactions
After you buy:
- Set up proper expense tracking
- Make the Section 871(d) election if renting
- Plan for annual US tax filing
- Consider estate planning if appropriate
Why This Shouldn’t Stress You Out
Buying US property as a foreigner or expat is completely manageable with proper guidance. Most people find the tax implications less scary than expected, especially when they realize how many tools exist to minimize their actual tax burden.
We have a rigorous hiring process for both our accountants and customer service representatives. We only hire the best. Only an excellent CPA or Enrolled Agent will touch your return from start to finish. Peace of mind is something we deliver year-round, not just during tax season.
Ready for expert help? No matter how late, messy, or complex your return may be, we can help. You’ll have peace of mind, knowing that your taxes were done right.
Contact us, and one of our customer champions will gladly help. If you need specific advice on your tax situation, click below to get a consultation with one of our expat tax experts.
Disclaimer: This article is for informational purposes only and should not be considered tax advice. Tax laws are complex and change frequently. Please consult with a qualified tax professional for advice specific to your situation.
