INVESTING IN THE USA: THE TAX ADVANTAGES

INVESTING IN THE USA: THE TAX ADVANTAGES

More and more investors, especially those from abroad, are choosing to invest in US real estate due to the country's numerous tax benefits. Investing in US real estate in a stable and dynamic US real estate market can be particularly lucrative. Whether you are a French or non-resident investor, the United States offers an attractive tax framework, with interesting opportunities depending on the state and legal structure chosen. In this article, we will explore the tax advantages of investing in US real estate, including tax differences with France, advantageous tax regimes for non-residents, and taxes to consider when investing.

Tax differences between France and the USA

American taxation differs significantly from French taxation, and this difference is one of the main factors driving investors to invest in US real estate . In France, personal income tax rates can reach high rates, up to 45%, and capital gains taxes on real estate can reach up to 30%. In contrast, tax rates in the United States are often more moderate.

Federal income tax in the United States ranges from 10% to 37% depending on income, with substantial tax savings opportunities available through real estate-specific deductions. In addition, foreign investors can benefit from a tax exemption on certain types of income under the Franco-U.S. tax treaty , which allows them to avoid being taxed twice.

In France, on the other hand, rental income and capital gains are taxed at a relatively high rate, and social security contributions may be added to these taxes. The Franco-American tax treaty helps avoid this double taxation, making US real estate investment particularly attractive to French citizens.

France vs USA investment

Tax Implications of Real Estate Investing in the USA

Investing in the USA offers several major tax benefits, which vary depending on the legal structure chosen and the type of investment made. One of the biggest tax advantages is the ability to deduct a wide range of real estate-related expenses. As a property owner, you can deduct expenses such as:

Loan interest

Management fees

Repairs and renovations

Property taxes

All of these deductions can reduce your taxable income, resulting in a reduction in federal income tax . This tax flexibility is much more advantageous than in France, where tax deduction possibilities are more limited.

Another key tax benefit in the United States is the ability to depreciate the value of the property. Real estate depreciation allows investors to spread the purchase cost over a period of 27.5 years for residential properties and 39 years for commercial properties. This mechanism reduces the tax base each year, thus reducing the total amount of taxes payable.

Advantageous tax regimes for non-resident investors

If you are a foreign investor, you can also benefit from very advantageous tax regimes in the United States. For example, by creating a legal structure such as a Limited Liability Company (LLC) , you can benefit from significant tax breaks. The LLC allows you to protect your personal assets while giving you flexible management of the income generated by your real estate investment. In addition, gains realized through this structure are often subject to lower tax rates.

Non-resident investors can also take advantage of the Franco-American tax treaty , which provides specific rules to reduce or even avoid double taxation. For example, if you receive rental income from a property located in the United States, you can choose to declare it only in the United States, as the tax paid in the United States offsets the tax in France.

Investing in the USA: taxes to consider

When it comes to investing in US real estate , there are several taxes to consider, and they vary by state. Among the most common are income tax and capital gains tax.

Income tax

In the United States, income tax can be significantly reduced through tax deductions related to real estate investment. Whether you are a resident or non-resident, you will be required to report your rental income to the US tax authorities, but this income can be significantly reduced through deductions such as loan interest, maintenance costs, and depreciation.

Capital gains tax

When selling real estate, capital gains tax may be a factor to consider. If you hold a property for more than a year before selling it, you will be subject to long-term capital gains tax, which generally benefits from more favorable tax rates (between 15% and 20%, depending on your income bracket). However, selling a property before a year has passed will result in the application of short-term capital gains tax, equivalent to your ordinary income tax rate.

Local taxes

In addition to federal taxes, there are local taxes that vary from state to state. For example, some states, like Florida , do not impose a personal income tax , which can be a significant advantage for real estate investors. Other states, like California , have higher tax rates on income and capital gains, which can reduce the profitability of an investment.

Investing in the USA: tax advantages

Tax opportunities by state

The United States is a vast territory, and tax policies vary considerably from state to state. Here are some examples of states where investing in US real estate can be particularly advantageous.

Florida: A State Without an Income Tax

One of Florida 's key tax advantages for real estate investors is that it has no personal income tax . This makes it a prime choice for investors looking to maximize their net returns. Florida has a robust real estate market and consistent demand for short- and long-term rentals, particularly in Miami and Orlando. These factors make Florida an ideal state for real estate investment .

California: A dynamic market but more fiscally burdensome

California , while boasting an extremely dynamic real estate market , with high prices in Los Angeles and San Francisco, has a higher tax burden, particularly in terms of income tax and capital gains. The state has progressive tax rates, up to 13.3%, which can have a significant impact on net returns. However, the California real estate market remains one of the most attractive for long-term investors due to its stability.

Why invest in real estate in the United States?

Investing in US real estate offers unique tax advantages, including the Franco-American tax treaty , the ability to benefit from tax deductions on rental income and depreciation, and the opportunity to reduce double taxation. Depending on the state chosen, investors can also benefit from lower taxes and the absence of personal income tax, as is the case in Florida .

Whether you're interested in the stable Florida real estate market or looking to explore opportunities in San Francisco or Los Angeles , the US real estate market offers a variety of opportunities for those looking to invest in US real estate while benefiting from an attractive tax framework. As an expert in US real estate investment , Investir.us will guide you through all the steps necessary to make your investment a success.