Renting out your US home as a European owner

Can you rent it out at all?

Nothing in US federal law stops a nonresident from letting a home they own. The limits sit closer to the property. Your mortgage may restrict letting, a homeowners association or condominium may set a minimum lease length or ban rentals, and a city or county may regulate short stays through zoning. Those rules differ from one street to the next, so they belong in your checks before you buy, not after the first booking.

Our Florida guide shows how far this varies inside one state: the same state law applies everywhere, yet the answer for a holiday let changes by city and by older local rules. The other pages under our locations section do the same for each area.

The default: tax on the gross rent

The IRS states that income from real property in the United States owned by a nonresident alien is taxed at 30%, or a lower treaty rate, if it is not effectively connected with a US trade or business. Its overview of nonresident taxation adds that this kind of income is taxed at the flat rate with no deductions allowed against it.

In plain terms: if nothing else is done, the tax is worked out on the rent you receive, before mortgage interest, property tax, insurance, repairs or management fees. For a home with a mortgage and running costs, that can take a large share of the real profit. The IRS also says the owner gives Form W-8ECI to a withholding agent or payer when income is claimed as effectively connected.

The alternative: tax on the net rent

A nonresident owner of US real property held for income can choose a different route. Under section 871(d) of the Internal Revenue Code the owner may elect to treat all income from that property as effectively connected with a US business. The IRS says this lets the owner claim deductions and pay tax at graduated rates, the same rates that apply to US citizens and residents, instead of the flat 30%.

• How it is made. By attaching a statement to Form 1040-NR, or to an amended Form 1040-X. The statement lists, among other things, all the US real property you own and the income from it.
• What it covers. All US real property held for income, and the IRS names rental income among the items.
• How long it lasts. Until you revoke it. You file Form 1040-NR for the year you first elect and for every year after.
• The deadline. The IRS says to file within sixteen months of the original due date or lose deductions and credits unless the IRS grants a waiver. Treat the exact timing as something to confirm with your adviser.

Whether the net route beats the gross route depends on your costs and on any treaty between the United States and your country. The IRS notes that treaty rates and exemptions vary by country and by type of income, and its treaty page lists the partner countries. We do not state a treaty rate here.

Forms and numbers you will meet

Form 1040-NR is the nonresident return. The IRS instructions say you need a Social Security number or an ITIN to file, and that the election lets you report this real property income on the main form rather than on Schedule NEC.

An ITIN is, in the IRS wording, a tax processing number for certain nonresident and resident aliens who cannot get an SSN. You request it on Form W-7. Most European owners will not have an SSN, so the ITIN is the usual question. Ask early how long your adviser expects it to take.

Form W-8ECI is what a foreign owner gives to a withholding agent or payer to say that the income is effectively connected. The IRS form page shows a revision date of October 2021.

A holiday home you use yourself

Mixed use changes the calculation. IRS Publication 527 for 2025 treats a home used both as a home and as a rental in its own chapter. A day counts as personal use when you or your family stay there, and the publication says that if you rent the home for fewer than 15 days in a year, you do not include that rent in income. Expenses are also limited when you use the home personally and rent it for longer.

Publication 527 is written for US taxpayers, so we cannot say how its personal use rules apply to a nonresident who elects net treatment. Confirm that point with a cross-border tax adviser. Keep a calendar of your own stays and of rented nights from the first day; the figures you cannot reconstruct later are the ones that cost you.

How lenders see a rental

Lenders sort homes by how you use them, and the label changes the loan. Fannie Mae's Selling Guide defines three occupancy types. A principal residence is the home you live in. A second home is a one-unit home you occupy for part of the year, suitable for year-round use and under your exclusive control. It is not a timeshare or a rental pool, and no third party may control when it is occupied. An investment property is one you do not occupy.

Fannie Mae prices second homes and investment properties with extra adjustments and requires its automated underwriting approval for both. For a borrower with several mortgaged homes, the guide allows up to ten financed properties under automated underwriting and adds reserve requirements that rise with the number. If you want to use expected rent to qualify, the guide asks for at least twelve months of property management experience, documented for example on tax return Schedule E, with a lease acceptable only in set cases.

The practical point: tell the lender how you will use the home before you apply. A loan taken as a second home and then let all year can breach the loan terms. Read foreign national loans for how lenders outside the standard rules treat a non-resident buyer.

Tax at home

US tax is only one layer. Your home country will usually want to know about foreign rental income, and how it gives relief for tax paid in the United States depends on that country and on its treaty with the United States. We do not set out any country's rules here. The IRS treaty page confirms treaties exist and vary; your home tax authority tells you what it credits or exempts, and a cross-border adviser can put the two returns side by side. Our country guides name the right tax body for each European country we cover.

Questions people moving from Europe ask

Continue your research

• Foreign national loans: US mortgages for buyers living in Europe
• How much down payment and cash you need for a US home
• Florida
• Buying a US home from the UK or the EU
• Start a personal US mortgage scan