Cross-Border Individuals
US Tax Filing for Non-Residents With US Rental Income (Form 1040-NR): What You Owe and How
A non-resident with US rental income generally files Form 1040-NR. By default, US rental income is taxed at a flat 30% on the gross rent with no deductions. But by making a net election (treating the rental as effectively connected income), you can deduct expenses and depreciation and be taxed at graduated rates on the net profit — usually far less.
Non-resident owners of US rental property are often shocked by the default 30% gross withholding — and unaware that a simple election usually fixes it. This page explains both paths.
The default: 30% on gross rent
Absent an election, US-source rental income paid to a non-resident is treated as fixed, determinable income subject to 30% withholding on the gross amount. No deductions for mortgage interest, taxes, repairs, management, or depreciation are allowed against it. For most landlords this produces a far higher tax than their actual economics justify.
The net election (effectively connected income)
A non-resident can elect to treat US real-property rental income as effectively connected with a US trade or business. The income then goes on Form 1040-NR and is taxed at graduated rates on net profit after deductions.
| Default (no election) | With net election | |
|---|---|---|
| Tax base | Gross rent | Net rental profit |
| Deductions / depreciation | Not allowed | Allowed |
| Rate | Flat 30% | Graduated rates |
Practical steps
The owner typically needs an ITIN to file the 1040-NR, makes the net election with the return, and reports rental income and expenses much as a US owner would on Schedule E principles. Withholding paperwork can also be provided to the tenant or property manager to reduce or stop the 30% gross withholding once the election is in place. Selling the property later raises a separate FIRPTA withholding issue, covered on its own page.
Frequently asked questions
Do I have to pay 30% of my gross US rent?
Only by default. By making the net election to treat the rental as effectively connected income on Form 1040-NR, you are taxed on net profit at graduated rates instead, after deductions and depreciation.
Do I need an ITIN to report US rental income?
Generally yes. A non-resident individual typically needs an ITIN to file Form 1040-NR and to claim the net election and deductions.
Can I deduct mortgage interest and depreciation?
Yes, once you make the net election. Under the default gross-withholding treatment, no deductions are allowed.
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Request a free consultationThis page is general educational information, not legal or tax advice for your specific situation, and does not create a client relationship. Tax rules, amounts, forms, and procedures change — verify against current IRS guidance or consult a qualified tax professional before acting.