CLOSE X

Register - if you don't have an account

Yes! Sign me up for Global Property Guide's fortnightly email newsletter.


Login - for registered users

Forgot Password?
Explore destinations
continent map couldn't be loaded Pacific Europe & Russia North America Latin America Asia Africa Middle East Caribbean

 


Financial Overview

Directory

Property Search

Global Statistics

Regional Statistics






Mar 03, 2010

Tax Example: Rent


ELECTING TO TREAT RENTAL INCOME AS INCOME EFFECTIVELY CONNECTED WITH BUSINESS
Non-resident couple´s joint monthly rental income1 US$1,500 US$6,000 US$12,000
Annual Rental Income 18,000 72,000 144,000
Less Costs2 (900) (3,600) (7,200)
Less Depreciation3 (9,000) (30,286) (88,571)
= Taxable Income 8,100 38,114 48,229
Income Tax Rates4
Up to US$17,000 7% 567 1,190 1,190
US$17,000 – US$30,000 14% - 1,820 1,820
US$30,000 – US$50,000 25% - 2,029 4,557
Over US$50,000 33% - - 3,706
Annual Income Tax Due US$567 US$6,039 US$7,567
Tax Due as % of Gross Income 3.15% 7.00% 5.25%
Source:
Global Property Guide research

Notes


1 The property is jointly owned by husband and wife, but then taxed separately (50% upon each partner). Generally, non-resident foreign individuals are subject to a flat rate of 29% and the tax is imposed on the gross income (no deductions allowed). However, an election can be made to treat the income from real property as income effectively connected with business in Puerto Rico and the election allows the non-resident foreign individual to be taxed on his net income at progressive income tax rates.

2 Estimated values. Income-generating expenses such as maintenance fees, repairs, and property taxes are deductible. Only actually incurred expenses are allowed to be deducted from the gross income.

3 Estimated values.

4 The income tax rates in the table are for married couples filing jointly. The following income tax table applies for married couples filing separately:

INCOME TAX

TAXABLE INCOME US$ MARGINAL TAX RATE
Up to US%8,500 7% on band over US$1,000
US$8,500 – US$15,000 14% on band over US$8,500
US$15,000 – US$25,000 25% on band over US$15,000
Over US$25,000 33% on all income over US$25,000
Source: Global Property Guide


NOT ELECTING TO TREAT RENTAL INCOME AS INCOME EFFECTIVELY CONNECTED WITH BUSINESS
Non-resident couple´s joint monthly rental income1 US$1,500 US$6,000 US$12,000
Annual Rental Income 18,000 72,000 144,000
= Taxable Income 18,000 72,000 144,000
Income Tax Rates2
Flat Rate 29% 5,220 20,880 41,760
Annual Income Tax Due US$5,220 US$20,880 US$41,760
Tax Due as % of Gross Income 29% 29% 29%
Thanks to:
Kevane Grant Thornton LLP

DISCLAIMER:The information contained above is marketing material only and is not written tax advice directed at the particular facts and circumstances of any person and should not be relied upon. We encourage you to discuss your particular situation with us or an independent tax advisor. This information was last updated on March 14, 2007.

Notes


Kevane Grant Thornton LLP is a member firm of Grant Thornton International. Grant Thornton International is not a worldwide partnership. Member firms of the international organization are independently owned and operated.

1 The property is jointly owned by husband and wife, but then taxed separately (50% upon each partner). Generally, non-resident foreign individuals are subject to a flat rate of 29% and the tax is imposed on the gross income (no deductions allowed).

2 Non-resident foreigners not electing to treat their rental income as income effectively connected with business are taxed at the standard 29% rate which is levied on the gross income.






Comments


Be the first to comment on this article!



Login or Register to submit a comment!

In order to promote open and spam-free conversations, Global Property Guide moderates commetns on all articles. You can expect that your comment will be published within 24 hours.



Compare Countries



Free Newsletter

Fortnightly updates from the global property arena directly to your inbox.


Email Address:





Connect to professional advice in Puerto Rico





PROPERTY RECOMMENDATIONS

 
Download free property reports from international research houses

Our Newsletter

 
Fortnightly updates from the global property arena directly to your inbox.

Manage subscriptions