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Why Do I Need an ITIN?

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Question:  I am not a U.S. citizen and I do not reside in the United States.  I intend to purchase real estate in the United States.  Do I need an Individual Taxpayer Identification Number (an ITIN) from the Internal Revenue Service (IRS)?

Answer:  Yes.  If you buy real estate in the United States, you will need to open a U.S. bank account into which you will deposit the funds needed to buy the property and any income derived from the property.  Before you can open a U.S. bank account, you must obtain an ITIN.  For more on this topic see “International Taxpayer Identification Number (ITIN).”

To limit your liability from things that can go wrong with the property, you should always hold U.S. real estate in a type of entity called a limited liability company.  Canadians, however, should hold U.S. real estate in a limited liability partnership, not a U.S. LLC.  See “Should a Canadian Hold U.S. Real Estate in a Corporation, LLC, LP or LLP?

A U.S. LLC and LLP must have a EIN to open a U.S. bank account.  The LLC or LLP must obtain a federal employer identification number for the LLC  or LLP (it’s akin to an ITIN that identifies a non-U.S. citizen to the IRS).  U.S. Banks require that an LLC or LLP have an EIN before they will open a bank account in the name of the entity.

To obtain an ITIN, a non-U.S. citizen must complete, sign and deliver an IRS Form W-7 to the IRS with supporting documentation to prove the identity of the applicant.

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