You can own real estate in the U.S. without a green card or citizenship. Suppose you do not hold a green card or citizenship. In that case, an Individual Taxpayer Identification Number (ITIN), not a Social Security Number (SSN), will be issued to own real estate in the U.S.
The U.S. is an attractive real estate investment market for many. However, one must consider that the U.S. federal government and some state governments impose estate taxes. More than that, the tax rates are pretty high.
Thus, you should check how much tax will be imposed on the estates you invest in in the U.S. For this, you should first consider whether you have a green card or citizenship, whether you immigrated to the U.S., and whether you will keep your properties in your home country, etc. Then, you can set up an estate plan and investment properly.
For example, Chul Su Kim, who lived in Australia without estate tax, disposed of his properties in Australia and purchased properties in California. After that, if Kim died without obtaining a green card, the heir needed to report and pay taxes regarding Kim's properties only in the U.S.
As I mentioned in the previous column, the estate tax rate for a non-permanent resident is 30% for $150,000 or more of the estate; 35% for $250,000 or more; 37% for $500,000 or more; 39% for $750,000 or more; 40% for $1,000,000 or more. Even if a non-permanent resident's estate tax exemption amount is $60,000, the total estate tax amount is significant. If one-million-dollar real estate is given as an inheritance, $60,000 will be tax-exempted, but 40% of $940,000 must be paid as an estate tax to the U.S. government.
However, if Chul Su Kim achieved a green card and lived in the U.S. before his death, the estate tax exemption amount for permanent residents will apply to Kim (in 2022, the exemption amount is $12,070,000.) The difference between a permanent and a non-permanent resident in the exemption amount is substantial. However, one more thing that needs careful consideration is that if one is a permanent resident, an estate tax will be calculated based on all of his properties worldwide. He is required to pay 40% taxes on all of the estate that exceeds the tax exemption amount.
Suppose Kim still has some estates in Australia. In that case, he must pay tax for his properties in Australia to the U.S. government just because he has become a permanent resident of the U.S.—although he does not need to pay any taxes to the Australian government. When you achieve a green card, the estate tax exemption amount will increase, but the extent of the estates for taxation will also be expanded. So, you will want to consider how to deal with estates in your home country along with achieving a green card.
As in Chul Su Kim's case, if your home country's government imposes no estate tax, you can pay the tax only to the U.S. government. However, if your home country's government imposes an estate tax, like Korea, and if you have properties both in Korea and the U.S., you can encounter a situation where you must pay estate taxes to both governments.
Accordingly, if you are a non-permanent resident and have properties in the U.S., you should also be prepared for a double taxation issue in your inheritance process when you achieve a green card. Experts in each country often cooperate to address the client's case.
In Korea, the gift and estate tax amount is one of the highest in the world. However, the silver lining is that the estate tax exemption amount does not change considerably when the government changes. The gift and estate tax amount can be expected approximately.
In Korea, the gift and estate tax rate changes based on the total value of the estates by section. It means that the more you bequeath gifts or estates, the more tax you should pay. If you want to invest in estates in the U.S. and move your residence to the U.S., the easiest way to handle the double taxation issue, in most cases, is to dispose of estates in Korea as you achieve a green card. But, even in this situation, I encourage you to consult with an expert, check it thoroughly, and process it well.