Owning property in Nicaragua offers a unique lifestyle opportunity, but comes with specific tax considerations for US citizens. Understanding these implications is crucial for making informed decisions and ensuring financial compliance with both Nicaraguan and US regulations.
Nicaraguan Taxes:
- Annual Property Tax: This tax is generally lower than what you might be accustomed to in the US. The rate typically falls around 1% of the cadastral value (often lower than market value), making it relatively affordable.
- Capital Gains Tax: Selling your property at a profit triggers this tax. Rates can vary, and seeking a local tax advisor is highly recommended to understand the specifics before selling.
US Taxes:
- Global Income Taxation: As a US citizen, you are subject to US tax laws on all your worldwide income, including any income or capital gains from your Nicaraguan property.
- Foreign Tax Credit: The US offers a foreign tax credit to avoid double taxation, but you must still report all your Nicaraguan income and gains on your US tax return.
- No Tax Treaty: There is no specific tax treaty between the US and Nicaragua, meaning the basic requirement to report global income remains.
Estate Planning:
Owning property in Nicaragua adds complexity to your estate plan due to potential differences in Nicaraguan inheritance laws compared to US laws. To ensure your property is handled according to your wishes, consult with estate planning professionals in both the US and Nicaragua.
Remember: This information is for general guidance only and should not be considered tax advice. Always consult with qualified legal and tax professionals for personalized advice regarding your specific situation.
