Taxation in the USA

Residence
The US tax year runs from January 1 to December 31. The US taxes all US citizens on their worldwide income, irrespective of where they are resident. Non-US citizens who are temporarily working in the US will only be taxable in their US source income.

Tax on Rental Income:
The standard withholding tax rate of 30% is applicable to rental income. If a US return is filed claiming property expenses and mortgage interest and a depreciation allowance (this will be clawed back on sale) then the income will be taxed at progressive US rates from 15% -35%. In some states there will be "State Income Tax", as well.

Capital Gains Tax (CGT):
If the property is owned for more than one year, then the US Capital Gains rates will be either 8% up to 15% for larger gains. The shocker here is that under a US law called FIRPTA, the purchaser or his agent must withhold 10% of the purchase price and pay it over to the US IRS on account of your Capital Gains tax liability. There is a little known exemption to this, if the property is sold for less than $300,000 and the purchaser or a member of his family will occupy it as their residence and they certify to that effect. Obviously, if the withholding is made you can make a repayment claim if it exceeds the Capital gains.

Inheritance Tax (IHT):
Caution: Although US Estate tax rates offer a generous exemption, Non-Citizens cannot benefit and only have a $60,000 exempt amount. After that they are subject to progressive rates rising to 47% in 2005. Don't forget, there is State Inheritance tax that is levied either on top of, or as a deduction from Federal Estate Tax. If you give away your property during your life, there is a wholly separate Gift tax, with its own rules to consider.

US Income and Capital Gains rates are fairly low. Inheritance Tax is the real problem and needs to be planned for. Holding the property through a special type of Offshore Company may help, as may planning to leave the property in a "Special US Qualifying Domestic Trust" to your Spouse as this will produce a Spouse exemption up to the US exempt amount currently $1.5 million. It all needs specialist advice, taking into account the Irish aspects as well.