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The complicated U.S. tax system

Rental Income: Rental income is categorized as either Effectively Connected Income, wherein it is taxed at progressive federal tax rates, or Fixed Determinable Annual Periodical income, wherein it is taxed at 30% withheld by the tenant.

States also levy income taxes at varying rates.

Capital Gains: Capital gains tax for properties held for more than a year is 5%; otherwise the tax is 15%.

Inheritance: Federal estate tax is progressive with rates at 18% to 45% and an exemption of up to US$2,000,000. A Generation-Skipping Transfer Tax is also being levied on transfers to beneficiaries who are more than one generation younger than the transferor.

Residents: Resident foreigners, like U.S. citizens, are taxed on their worldwide income.

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