The best foreign real estate investments for US citizens under Trump are those in countries with tax rates lower or equal to the United States. As Trump lowers the US rate, your foreign investments need to change and keep pace. Here are the best foreign real estate investments under Trump.
Your objective is to buy real estate in countries with tax rates equal to or lower than the United States. As US citizens, you will always pay at least the US rate, so no need to go below that amount when investing abroad.
For example, let’s say you buy foreign real estate for $100,000. After 5 years you sell that property for $200,000. Your gain is $100.000, which is taxable in the United States at 20%. If you pay tax to the country where the property is located, you get a dollar for dollar credit on your US return.
- This 20% capital gains rate in the US on foreign real estate assumes the Obamacare tax has been repealed by Trump.
So, if the foreign real estate is located in Portugal, which has a 28% tax rate, you pay 28% to Portugal and nothing to the United States. This is because Portugal’s tax rate is higher than the US rate.
If the foreign real estate is in Mexico, which has a 10% capital gains rate, you pay 10% to Mexico and 10% to the United States.
And if that property is in Belize, which has no capital gains tax (a 0% rate), you pay nothing to Belize and 20% to the United States.
That is all to say, your capital gains tax rate will never be lower than the US rate. So, you can buy real estate in any country that has a capital gains tax equal to or lower than the US rate without increasing your tax cost of ownership.
The issue facing foreign real estate investors in 2017 is what will happen to the US capital gains rate under President Trump? He’s said he will lower it to 10% or 15% on long term gains. Can he get that done?
I don’t know what will happen in US politics, but I know where to invest. Focus on countries with capital gains rates of 10% or lower and you’re sure to profit no matter what happens.
Here’s a list of capital gains rates on foreign real estate investments:
Denmark 42.0%
France 34.4%
Finland 33.0%
Ireland 33.0%
Sweden 30.0%
United States 20%
Portugal 28.0%
United Kingdom 28.0%
Germany 25.0%
Canada 22.6%
Japan 20.3%
Chile 20.0%
Poland 19.0%
Hungary 16.0%
Greece 15.0%
Colombia 10.0% *
Mexico 10.0%
Nicaragua 10.0%
Panama 10.0%
Belgium 0.0%
Belize 0.0%
Czech Republic 0.0%
Turkey 0.0%
* Colombia has a low capital gains rate but taxes rental income at 33% with few allowed expenses. For this reason, Colombia is a high tax country for foreign real estate investment.
Under President Obama, clients were bullish on Chile, Poland, Canada and Japan. Under President Trump, you should focus on Mexico, Nicaragua, Panama, Belize and Turkey.
This advice to buy foreign real estate in countries with low capital gains rates goes double if you’re investing with your IRA. If you’re buying international real estate in an offshore IRA LLC, you want a zero percent rate (assuming returns are equal of course).
When you buy real estate in your IRA, all gains flow up to the retirement account tax free. Any tax paid to a foreign country is “wasted” because you pay no capital gains tax in the United States.
For this reason, the top country for IRA investors has been Belize. Their zero percent tax rate and steady growth have been great for US retirement accounts.
I hope you’ve found this article on the best foreign real estate investments under Trump to be helpful. For more information on investing offshore with your IRA, please contact me at info@premieroffshore.com or call us at (619) 550-2743.
