Can an H1B visa holder invest in real estate?
Many high-income professionals come to the US on a visa—most commonly an H1B visa. Naturally, they want to create generational wealth through real estate but are concerned that it may impact their immigration status or visa. Or many may wonder if it is even possible whatsoever.
These are legitimate concerns since strict rules exist against employment with anyone other than the employer who sponsors the visa. So, what about real estate? Is it possible to secure your financial future and take advantage of the many tax benefits of owning property with an H1B visa? In this article, we’ll explore the topic.
Is it possible?
In short, the answer is yes. While many restrictions are placed on H1B visa holders regarding employment, there is no such restriction regarding investing in real estate. H1B holders can buy and invest real estate and set up an LLC for rental income. However, there are considerations you’ll want to take into account.
Employment considerations
One is that your employment relationship is tied to the sponsoring employer. Do not actively participate in the operation of the business or undertake any work significant enough that could violate the terms of your visa. Before getting started, consult with an immigration and real estate attorney.
Additionally, as an H1B visa holder, there are many self-employment restrictions. Engaging in self-employment or owning a business while on H1B status can raise flags about whether you want to maintain the required employer-employee relationship. H1B regulations require that the sponsoring employer control and supervise your employment.
While you can own an LLC – more on that later – if your involvement is substantial enough to indicate that you are self-employed or not under the control of the H1B employer, it may raise questions about your H1B status.
LLC considerations
As we mentioned, no restrictions stop an H1B visa holder from forming and using an LLC to invest in real estate. Investors place their real estate in LLCs for a few reasons, including asset protection and anonymity. Additionally, if you want to buy a commercial property, some lenders require you to buy the property in an LLC.
However, it is essential to consider that there may be restrictions or requirements based on the specific laws and regulations of the state where the LLC and property are located. For instance, some states may require LLCs to have a registered agent or to file annual reports, or there may be zoning or landlord-tenant laws. We recommend you consult an immigration and real estate attorney to ensure compliance.
Tax considerations
One of the most confusing parts of working in the US with an H1B visa is the issue of taxes. If you’re physically present in the US for a substantial portion of the tax year (usually 183 days or more), you will be considered a resident alien for tax purposes. You could file taxes using the same forms and rules as US citizens or permanent residents. If you were in the US for less than 183 days during the tax year, capital gains are tax-exempt unless they are effectively connected with a trade or business in the US during the tax year.
Additionally, if you sell real estate in the US and have been there for less than 183 days during the tax year, you will generally be classified as a non-resident alien for tax purposes. This can result in some tax consequences, including:
- Capital gains taxes – a non-resident alien's sale of real estate may be subject to a US federal capital gains tax of 15%, but please seek professional advice as tax rates and regulations may change.
- Withholding requirement – buyers of properties typically must withhold a certain percentage of the sale proceeds, also known as FIRPTA withholding, and remit it to the IRS as prepayment of your potential capital gains tax liability. This can be 15% of the sales price but varies.
- State and local taxes – rates vary but are often 10-15% of the property sales price.
While in the US on an H1B visa, you can invest in real estate, which can be a great way to build wealth. We’ve provided a few tips on how to do so while carefully considering your visa status, but, as always, consult the tax and legal experts before you jump in headfirst.
Nestment, Inc. does not guarantee and is in no way responsible for the accuracy of the information provided in this blog post. All information is provided “AS IS” and with all faults. Data presented here may not reflect all real estate activity in the market. While the information on this site is about legal and tax issues, it is not intended as legal or tax advice or as a substitute for the particularized advice of your own attorney and tax professional.