Have you been dreaming of purchasing American real estate, particularly in the United States, but aren’t sure where to begin? Don’t worry; this article is designed just for you. If you’re tired of investing in Nigerian properties and want to explore international opportunities, particularly in the US, this article will expand your understanding and guide you through the process of buying property in America from Nigeria.

You may be wondering, “Is this even possible?” The answer is simple: Yes. All you need to do is continue reading.

This guide provides a comprehensive insight into how to purchase property in the US from Nigeria.

Types of American Property

There are various types of American properties you can choose from, depending on your needs. Here are the five main classifications of property in the US:

1. Residential Property: This type of property is for individuals or households to live in. It includes a range of living arrangements, from homes to apartments.

2. Commercial Property: These properties are primarily used for business purposes. Any property that generates income falls under this category, such as office buildings, shopping centers, and other commercial facilities.

3. Industrial Property: This includes properties used for industrial purposes, such as manufacturing, production, or distribution of goods.

4. Raw Property: This refers to land that has not yet been developed or used for any purpose. It could be raw land where no construction or farming has taken place.

5. Special-Use Property: These are buildings or land designed for specific purposes, often with unique architectural features that make them suitable only for their intended use, such as schools, hospitals, or religious buildings.

Now that you understand the different types of properties available, let’s dive into how to buy a US property from Nigeria.

How to Buy American Property from Nigeria

Anyone, including non-citizens, can buy property in the US. As a Nigerian, here are the steps you need to follow:

1. Understand Tax Implications First

It’s important to know that anyone can purchase property in the US, regardless of their citizenship status. Nigerians are eligible to buy property, and even qualify for a mortgage under certain conditions. However, non-US citizens face more complex tax issues than US citizens. Understanding these tax rules will help you make the most of your investment.

Below is an overview of what foreign property owners need to file in the US, as well as the taxes they should expect to pay when renting or selling property. For instance, you’ll need to know when a 1040NR form is required, or if 30% withholding is necessary from your payments. For more details, check out our 10 quick facts on buying property as a non-US citizen!

2. IRS Publication 515

The IRS Publication 515 outlines the tax regulations for non-resident aliens (NRA). Under the Foreign Investment in Real Property Tax Act (FIRPTA) of 1980, Congress imposes taxes on foreign persons when they sell or receive income from US real property.

Tax Rates: Generally, income from real estate in the US that belongs to a non-resident alien is taxed at a 30% rate (or lower under certain treaties), provided the income isn’t connected to a US trade or business.

3. Choose How Your Property Income Is Treated

If a non-resident alien owns or has an interest in US property that generates income, they can choose to treat that income as connected to a US trade or business. This choice applies to all income from real estate in the US, allowing deductions for related expenses like mortgage interest and property taxes, which reduce taxable income.

4. Elections to Make

This choice, known as the Section 871(d) election, makes a big difference. For example, without the election, gross rental income of $30,000 would result in a $10,000 tax bill (30%). With the election, deductions could reduce the taxable income, and the tax would be calculated based on the net amount.

5. Tax Treaties

Tax treaties may reduce the tax rate on real estate income, depending on the treaty between the US and your home country.

6. Taxation on Gains

When a non-resident sells US property, any gains are taxed as though the seller were a US citizen. Long-term capital gains rates may apply if the property was held for more than 12 months.

7. Withholding Tax

Non-residents are subject to a 15% withholding tax on the sale of US property, unless an exemption is filed in advance. A lower rate of 10% applies to properties sold for less than $1 million that were acquired as personal residences.

8. State Taxes

Some states may impose additional tax withholding or tax liabilities.

9. 1040NR Filing

Non-resident aliens are required to file a 1040NR tax return to report real estate income and any withholding, if the Section 871(d) election is made. You’ll also need to get a US Taxpayer Identification Number (TIN) to file the return.

Conclusion

As a Nigerian, buying property in the US is not as complicated as it may seem. After choosing the state where you want to invest, explore online marketplaces like Realtor.com, Remax.com, Zillow.com, Trulia.com, Redfin.com, and TrovitHomes.com to find properties. If you need assistance in purchasing US property while in Nigeria, we can help make the process smooth and easy.