Owning a US short-term rental from abroad: the tax map

Updated September 2026. Hexuvium started in Brussels, and many of the owners who ask us about the United States are, like us, based outside it. American property is open to foreign buyers, but the tax system treats non-residents differently at every stage: while you own, while you rent, when you sell and, less pleasantly, at death. This is a high-level map, built on IRS guidance, of the points a foreign owner should settle with a cross-border tax adviser before buying.

First, a taxpayer number

A non-resident who is not eligible for a Social Security number needs an Individual Taxpayer Identification Number (ITIN) to file U.S. returns. The IRS issues it on Form W-7. An ITIN exists for tax purposes only: the IRS states plainly that it does not authorize anyone to work in the United States. If you hold the property through a company, the company needs its own Employer Identification Number (EIN).

Rental income: taxed on gross or on net

The default treatment surprises most foreign owners. Rental income received by a nonresident alien who is not engaged in a U.S. trade or business falls into the category the IRS calls FDAP (fixed, determinable, annual or periodical) income. According to IRS guidance current in 2026, FDAP income is taxed at a flat 30%, or a lower treaty rate where one applies, with no deductions allowed. On a short-term rental, where cleaning, utilities, supplies, management and depreciation absorb a large share of revenue, a tax on gross receipts can wipe out the return.

The way out is an election. IRS Publication 519 explains that a nonresident can choose to treat income from U.S. real property as effectively connected with a U.S. trade or business. That income is then taxed at the ordinary graduated rates on a net basis, after expenses and depreciation, and reported on Form 1040-NR. The choice is made by attaching a statement to the return, covers all of your income from U.S. real property, and stays in force for later years unless revoked. A short-term rental with regular guest services may also amount to a trade or business in its own right; either way, this is an analysis for your adviser.

Deadlines carry real weight here. The IRS warns that a nonresident's return must be filed within 16 months of its due date to claim deductions and credits. For a rental, a late return can mean being taxed on gross income after all.

Who withholds, and why they ask for forms

U.S. tax on payments to foreign persons is enforced largely through withholding by whoever makes the payment. Booking platforms, property managers and tenants that pay a foreign owner will ask for a Form W-8 to document your status, and the form you provide, together with any net-basis election, determines what they hold back. Expect this at onboarding with every platform or manager, and keep copies of what you sign.

Holding through a U.S. LLC

Many foreign buyers use a single-member U.S. LLC for liability reasons. For income tax it is usually disregarded, but it carries a specific filing. Under the section 6038A regulations, a foreign-owned U.S. disregarded entity must file a pro forma Form 1120 with Form 5472 attached, reporting transactions with its foreign owner. The IRS instructions current in 2026 set a $25,000 penalty for failing to file. On a separate track, FinCEN's beneficial ownership reporting still applies to companies created abroad and registered to do business in a U.S. state, while companies created in the United States are now exempt.

State taxes do not disappear

Federal rules are only half the picture. States with an income tax generally tax rental income from property located within their borders, whoever owns it, and expect a non-resident return. Lodging and sales taxes on each stay apply exactly as they do for a domestic owner, and so do local permits. A few states levy no personal income tax, including Florida, Texas, Tennessee and Nevada, which simplifies the income side but not the lodging taxes.

Selling: FIRPTA withholding

When a foreign person sells U.S. real estate, the Foreign Investment in Real Property Tax Act (FIRPTA) requires the buyer to withhold part of the price and pay it to the IRS. The IRS gives the general rate as 15% of the amount realized, in force for dispositions after 16 February 2016. There is a residence exception: no withholding when the price is $300,000 or less and the buyer intends to live in the property, and a reduced rate between that amount and $1 million, again only for a buyer who will live there. An investor buying your rental will usually not meet that condition.

Withholding is a prepayment, not the final tax. The actual gain is computed on your Form 1040-NR and any excess is refunded. Where the expected tax is lower than the amount to be withheld, a withholding certificate can be requested on Form 8288-B; plan it well before closing, or the cash may sit with the IRS until your return is processed. Keep every record of the purchase price, improvements and depreciation claimed, since all of it feeds the gain calculation.

The estate tax trap

This is the point most foreign buyers miss. The IRS requires an estate tax return for a nonresident who is not a U.S. citizen when the U.S.-situated assets at death exceed $60,000, a threshold still unindexed in 2026, and real estate located in the United States is squarely a U.S.-situated asset. That threshold is tiny next to the value of a rental property. Estate tax treaties and ownership structures can change the outcome, which is exactly why the structure should be chosen before the purchase, not after.

A foreign owner's checklist

• ITIN or EIN obtained before the first payout.
• Net-basis election discussed and documented with your adviser; returns filed on time, every year.
• W-8 forms supplied to every platform and manager that pays you.
• Entity filings, such as Form 5472 and state reports, on the calendar if you hold through an LLC.
• Estate planning reviewed in both countries.
• A complete file kept for the eventual sale and its FIRPTA withholding.

We know the cross-border owner's position from the inside. If you are weighing a U.S. property from abroad, we study every request and tell you honestly whether and how we can help. This article summarizes IRS guidance for general information; it is not tax advice, and a cross-border tax professional should confirm your situation.