Tax Pitfalls for Non-Residents: What You Need to Know

Investing in Miami — or more broadly investing in Florida — is increasingly appealing to international investors, particularly those from France and Europe. Attractive taxation, strong economic momentum, legal stability: the arguments are numerous for considering an investment in Miami as a powerful lever for portfolio diversification.

But caution is key: the U.S. tax system has its own specific rules, and they can easily catch non-residents off guard. Poor structuring choices, filing mistakes, misunderstanding withholding rules, or neglecting local taxes — these pitfalls can significantly reduce the net return of an investment or even create legal exposure.

To fully secure your investment in Florida, it is essential to understand these risks and work with a qualified local expert. Capitalink Miami outlines the main tax pitfalls international investors should watch carefully.

1. Poor Structuring: A Common and Costly Mistake

Many foreign investors make the mistake of purchasing U.S. real estate in their personal name, assuming it will simplify the process. In reality, this approach often creates several tax and estate-planning issues:

Unlimited personal liability

In case of a dispute related to the property (accident, tenant claim, etc.), the owner’s personal assets may be exposed.And because U.S. legal tradition allows for significantly higher damages than in Europe, the risk can be substantial.

Higher taxation

Owning property personally can result in heavier taxation on rental income and more complex IRS filing requirements.

Estate tax complications

Upon the death of a non-resident owner, U.S. real estate held directly may be subject to federal estate tax of up to 40% of the property’s value — with a very small exemption for non-residents.

Best practice

Setting up an appropriate structure — such as an LLC or a hybrid structure (LLC + Corporation) — helps optimize taxation, improve liability protection, and simplify inheritance planning.Capitalink Miami assists clients in selecting the right structure based on their profile and country of residence.

2. FIRPTA Withholding: Often Misunderstood

FIRPTA (Foreign Investment in Real Property Tax Act) is one of the most significant — and least understood — tax mechanisms for foreign investors selling real estate in Miami or Florida.

How does FIRPTA work?

When a non-resident sells U.S. real estate, the buyer is legally required to withhold 15% of the sale price as a federal tax prepayment.This is not a final tax but an advance withholding.

Common misconception

Many investors believe FIRPTA represents their final tax liability. In reality:

• the amount withheld has nothing to do with the actual capital gain,

• the seller must file a U.S. tax return to claim a refund (partial or full),

• without proactive action, part of this withholding may be lost permanently.

Best practice

Plan for FIRPTA as soon as the decision to sell is made, and prepare the documentation with a CPA.Capitalink Miami coordinates FIRPTA filings to avoid delays and excessive withholding.

3. Taxation of Rental Income: A Specific System

Rental income generated in the U.S. is taxable in the U.S., even if the owner resides abroad. Two options exist:

Option 1 – Flat 30% tax on gross income

If no tax election is made, the IRS automatically taxes gross rental income at 30%, with no deductions allowed.This is one of the most frequent pitfalls: many investors are unaware that they must elect to be taxed on net income.

Option 2 – Taxation on net income

By filing the appropriate form (notably W-8ECI), owners can deduct real expenses:

• management fees

• property taxes

• mortgage interest

• depreciation

• repairs and maintenance

This option is far more advantageous for most investors.

Best practice

Set up the correct tax election immediately after acquiring the property.Capitalink Miami guides investors to optimize returns and avoid filing mistakes.

4. Double Taxation: How to Avoid Paying Twice

Many investors fear they will be taxed both in the U.S. and in France. In reality, the France–U.S. tax treaty prevents double taxation.

Two key principles:

• Rental income is taxed in the U.S., then declared in France with a tax credit to neutralize double taxation.

• Capital gains are taxed in the U.S. and reported in France for information only, with no additional tax.

The pitfall

Problems arise when the investor fails to comply with filing obligations in one country or the other. This can lead to:

• penalties,

• delayed reimbursements,

• banking complications,

• increased scrutiny during audits.

Capitalink Miami works with French and U.S. tax specialists to ensure full compliance.

5. Local Taxes in Florida: Frequently Overlooked

Investing in Florida also means dealing with local taxes, often underestimated by foreign buyers.

Property Tax

Typically between 1.0% and 2.0% of the property value, depending on the county.The amount varies based on:

• property use (residential, rental, investment),

• location (Miami Beach, Brickell, Doral…),

• available exemptions (homestead, which does not apply to non-residents).

Sales & Tourist Taxes

Short-term rentals (Airbnb, seasonal rentals) trigger additional taxes:

• sales tax

• tourist development tax

• occupancy tax

Failure to collect and remit these taxes can lead to significant penalties.

Best practice

Define the rental strategy before purchasing and calculate the applicable taxes.Capitalink Miami prepares detailed pro forma projections including all taxes to give investors a clear view of net returns.

6. Filing Obligations: A Strict Calendar

Missing or delaying required filings exposes investors to fines and administrative complications.

Key filings for non-residents include:

• Form 1040-NR for rental income

• LLC filings (Form 5472, Annual Report)

• FIRPTA forms upon sale

• State-level filings (depending on location)

• Short-term rental tax filings (monthly or quarterly)

Many investors discover these obligations too late, exposing themselves to retroactive tax liabilities.

Capitalink Miami coordinates CPAs, attorneys, and managers to ensure ongoing compliance.

Conclusion: Avoiding Tax Pitfalls for a Smooth Investment Journey

Investing in Miami or Florida offers strong advantages, but the U.S. tax system requires rigor and anticipation.Poor structuring, FIRPTA misunderstandings, improper rental income elections, overlooked local taxes, and strict filing requirements can all reduce returns and introduce risk.

With expert guidance, investors can:

• reduce tax exposure,

• secure their operations,

• optimize their wealth structure,

• avoid legal and inheritance issues.

Capitalink Miami supports international investors at every stage — structuring, acquisition, management, and resale — with proven expertise in tax, legal, and operational matters.

We help our clients invest safely and maximize the long-term performance of their assets in Florida.