Non-US citizens can buy American real estate with no special federal permit required. Israeli investors must navigate FIRPTA withholding on sales, annual FBAR filings if accounts exceed $10,000, and a choice between direct ownership and fund investing. The US-Israel tax treaty prevents full double taxation on rental income.
- FIRPTA withholds 15% of the gross sale price — not just your profit — when a foreign investor sells US property.
- The US-Israel tax treaty (Article 23) lets Israeli residents claim a foreign tax credit for US taxes paid on rental income, avoiding full double taxation.
- A Florida LLC costs $125 to form plus a $138.75 annual report fee — a low-cost layer of liability protection for foreign owners.
- Residential cap rates in strong US markets run 5.5%–7.5% depending on asset class and location.
- FBAR filing is required any year your combined foreign financial accounts exceed $10,000 at any point.
Can a Non-US Citizen Buy Real Estate in the United States?
Yes — foreign nationals, including Israeli citizens, can legally purchase and own US real estate with no citizenship or residency requirement. The US imposes no blanket restriction on foreign property ownership. What changes for non-residents is the tax and compliance layer, not the right to own.
In practice, a foreign investor goes through the same closing process as any domestic buyer: sign a purchase agreement, complete due diligence, wire funds, and receive title. The structural decisions — whether to hold title personally or through a US LLC, how to handle tax withholding on rental income, and how to file annually — are where execution gets specific. None of these are obstacles. They are a checklist, and this page walks through each one.
Setting Up Your US Structure: Do You Need an LLC?
Most foreign investors in US real estate benefit from holding property inside a US LLC (Limited Liability Company) rather than in their personal name. An LLC separates personal liability from property-level risk, provides a clean entity for opening a US bank account, and can simplify annual tax reporting.
Florida is one of the most common formation states for Israeli investors targeting Sun Belt markets. Florida LLC formation costs $125 in state filing fees, plus a $138.75 annual report fee — a minimal overhead relative to the asset being held. Texas has similar low-friction formation options.
One nuance: a single-member LLC owned by a foreign person is treated as a "disregarded entity" for federal tax purposes, meaning you still file a Form 1040-NR as an individual. Multi-member structures carry different rules. Consult a US tax attorney before choosing your structure — but do not let the decision delay your entry. Most investors start with a single-member Florida or Texas LLC and refine from there.
Getting Your ITIN and Opening a US Bank Account
Before you can file US taxes on rental income, you need an ITIN (Individual Taxpayer Identification Number) — the IRS-issued identifier for non-residents who aren't eligible for a Social Security Number. You apply via Form W-7, typically alongside your first US tax return, or through a Certifying Acceptance Agent who can process the application without requiring you to mail your passport.
With an ITIN and a formed LLC, opening a US business bank account becomes straightforward. Most regional banks and credit unions accept foreign-owned LLCs; some national banks require an in-person visit at a US branch. A US bank account is non-negotiable — it's where rent is deposited, where your property management fee (typically 8–12% of gross monthly rent for a professionally managed rental) is drawn, and where funds for repairs, taxes, and insurance flow.
How to Transfer Money from Israel to the US
Transferring purchase funds from Israel to the US is a documented process, not a gray area. Israeli banks are required to report large outbound transfers under Bank of Israel regulations, so expect your bank to request documentation: proof of property purchase (a signed contract), and a declaration of the transaction's purpose.
Wire transfers above certain thresholds trigger automatic reporting to the Bank of Israel. This is not a problem — it is compliance. Have your purchase contract, LLC formation documents, and attorney escrow instructions ready before you initiate the wire. Allow 3–7 business days for international settlement.
The FBAR (Foreign Bank and Financial Accounts Report, FinCEN Form 114) applies on the US side: if your aggregate foreign financial accounts exceed $10,000 at any point during the calendar year, you must file an FBAR. This is a disclosure form, not a tax — but the penalties for non-filing are severe. File it annually alongside your US tax return.
What Taxes Does a Foreign Investor Pay on US Rental Income?
Foreign investors with US rental income file Form 1040-NR (Non-Resident Alien Income Tax Return) annually. Rental income is reported on Schedule E, where you deduct operating expenses — mortgage interest, property taxes, insurance, repairs, depreciation, and property management fees — to arrive at net taxable income.
The US-Israel tax treaty (Article 23) allows Israeli residents to claim a foreign tax credit in Israel for taxes already paid to the US on that same rental income, preventing full double taxation. This makes the effective combined tax burden more manageable than it initially appears.
One concept to know: passive activity loss (PAL) rules under IRC §469. If your rental generates a tax loss in a given year — common in early years with depreciation deductions — that loss may be suspended and carried forward rather than immediately deductible, unless your gross income is below the phase-out threshold or you qualify as a real estate professional. Most Israeli investors do not qualify as real estate professionals under IRS rules, so expect losses to accumulate and offset future passive income.
What Is FIRPTA and How Does It Affect You at Exit?
FIRPTA (Foreign Investment in Real Property Tax Act) is the IRS mechanism for ensuring foreign sellers pay US capital gains tax. When a foreign person sells US real estate, the buyer is required to withhold 15% of the gross sale price — not 15% of the profit — and remit it to the IRS.
The distinction between gross price and profit is critical. On a $500,000 sale, FIRPTA withholding is $75,000 regardless of your cost basis or whether you made a gain. You then file a tax return to reconcile the actual tax owed, and any excess withholding is refunded. The process works, but it requires a US tax professional and adds 3–6 months to your post-sale timeline.
A related tool for deferring capital gains: the 1031 exchange, which allows you to roll proceeds from one investment property into another of equal or greater value, deferring tax entirely. Foreign investors can use 1031 exchanges, but FIRPTA withholding still applies at closing unless you obtain an IRS withholding certificate in advance.
Fund vs. Direct Ownership: Which Path Fits You?
The fork between investing in a US real estate fund (syndication) versus buying a property directly is the most consequential decision an Israeli investor makes. Each path has a different minimum, risk profile, and time demand.
תקציר
Foreign nationals, including Israeli investors, can legally purchase US real estate with no federal permit required. Key considerations include FIRPTA withholding of 15% of gross sale price on dispositions, annual FBAR filings when foreign accounts exceed $10,000, and the US-Israel tax treaty (Article 23) which prevents full double taxation on rental income. Residential cap rates in strong US markets run 5.5%–7.5%. A Florida LLC can be formed for $125 plus $138.75 annually, providing liability separation and cleaner cross-border accounting.
הצטרפו לקהילת המשקיעים
שאלו, שתפו והתעדכנו עם משקיעים ישראלים בנדל"ן אמריקאי.
הצטרפו לוואטסאפשאלות נפוצות
Can a non-US citizen buy real estate in the United States?
Yes. There is no federal law prohibiting foreign nationals from purchasing US real estate. Israelis and other non-residents can buy property outright, hold it through an LLC, or invest through a fund. Financing from US lenders is harder without a US credit history, so many foreign investors pay cash or use portfolio lenders who work with international buyers.
What taxes does a foreign investor pay on US rental income?
Foreign investors are taxed by the IRS on net rental income at standard graduated rates, and must file a US tax return (Form 1040-NR). The US-Israel tax treaty (Article 23) allows Israeli residents to claim a foreign tax credit for US taxes paid, preventing full double taxation. Proper structuring and a US-based CPA familiar with cross-border real estate are strongly recommended.
What is FIRPTA and how does it affect foreign real estate investors?
FIRPTA — the Foreign Investment in Real Property Tax Act — requires the buyer to withhold 15% of the gross sale price when a foreign seller disposes of US real property. This withholding applies to the full sale price, not just the gain, which can significantly affect cash flow at closing. Sellers can apply for a withholding certificate from the IRS to reduce the amount if actual tax owed is lower.
Do I need a US LLC to invest in US real estate as an Israeli?
You are not legally required to use an LLC, but most advisors recommend one for liability separation. A Florida LLC costs $125 as a state filing fee plus $138.75 per year in annual report fees — a relatively low cost for the protection it provides. LLC structure also creates a clean entity for opening a US bank account and simplifies accounting for multiple properties.
Should I invest in US real estate directly or through a fund?
Direct ownership gives you full control, all rental income, and appreciation upside, but requires local property management and active oversight from abroad. A fund (such as a syndication) pools capital across multiple assets, provides professional management, and lowers the minimum entry — but you give up control and liquidity. Residential cap rates in strong US markets run 5.5%–7.5%, so both paths can generate meaningful income depending on execution and asset selection.
How do I transfer money from Israel to the US to buy property?
International wire transfers from Israeli banks to US accounts are the standard method. Israeli banks are required to report large transfers, and you may need to document the source of funds for both the Israeli bank and the receiving US title company. Using a licensed currency exchange service can reduce fees versus a direct bank wire. Always verify wire instructions directly with the title company to avoid fraud.
What are the biggest risks of investing in US real estate from abroad?
Key risks include property management quality from a distance, currency exposure between the shekel and the dollar, unexpected capital expenditures, and tax compliance complexity across two jurisdictions. FBAR filing is required if your total foreign financial accounts exceed $10,000 at any point during the year, and missing it carries steep penalties. Working with a cross-border CPA, a vetted local property manager, and a legal structure appropriate to your goals materially reduces these risks.