Does a Foreign Person Receiving Rental Income Need an ITIN?

Does a Foreign Person Receiving Rental Income Need an ITIN?

Anyone who receives rental income for a property based in the United States must report this income to the IRS. If you are not a citizen, you must report this income using Form 1040NR, U.S. Nonresident Alien Income Tax Return. This will require you to get an ITIN (individual taxpayer identification number) if you do not already have one.

Tax Treatment of Rental Income

Income earned by a non-resident alien is categorized by the IRS as either connected or not connected to a U.S. business. The latter category is taxed at a flat rate of 30 percent. However, the IRS allows ITIN holders to automatically classify their real estate holdings in the "connected" category, which allows them to benefit from graduated tax rates based on net income. 

Purpose of the ITIN

The ITIN operates like a Social Security number for tax identification purposes. It is a nine-digit number that begins with the number nine. If you earn income in the U.S., you are required to fill out the ITIN application form if: 

● You are a nonresident alien. 

● You are a resident alien. 

● You are the dependent or spouse of a resident alien, nonresident alien, or visa holder. 

● You are not eligible to apply for a Social Security number. 

It's also important to review the ITIN exceptions before applying for a taxpayer number to ensure that you qualify. 

Obtaining an ITIN

ITIN W7 Document Preparation makes it easy to get ITIN number online. Our service will walk you through the ITIN number form and help you make the selections that fit your specific situation. Once you complete your Form W7 to apply for an ITIN number, you can attach it directly to Form 1040R to successfully report your rental income. We offer assistance in both Spanish and English and have a customer service team who can help you via email or chat.