Yes. If you earn rental income from a U.S. property and you are not a U.S. citizen or green card holder, you need an ITIN to file IRS Form 1040-NR and report that income correctly. Without an ITIN, the IRS withholds a flat 30% of your gross rental income with no deductions allowed. With an ITIN and a properly filed return, you pay tax only on your net income at graduated rates — often significantly less.
U.S. rental income earned by a non-U.S. resident (also called a nonresident alien, or NRA, by the IRS) is subject to U.S. federal tax. Without an Individual Taxpayer Identification Number (ITIN) — a nine-digit number issued by the IRS for individuals who cannot obtain a Social Security Number — a nonresident property owner cannot file a U.S. tax return, claim allowable deductions, or recover taxes that were over-withheld. An ITIN is a tax identification number that enables proper compliance.
Who Is Required to Have an ITIN for U.S. Rental Income?
Any individual who is not a U.S. citizen, green card holder, or resident alien for tax purposes — and who earns rental income from a U.S. property — is classified by the IRS as a nonresident alien (NRA). Nonresident aliens with U.S.-source rental income must report that income to the IRS and must have an ITIN to do so. If you are unsure whether the IRS considers you a nonresident alien, the residency determination matters more than most owners expect — and it is determined by specific IRS tests, not just where you live.
An ITIN is required if you fall into any of the following situations:
- You own a U.S. property (house, condo, commercial unit, vacation rental) and collect rent from tenants
- You receive rental income indirectly through a U.S. partnership or LLC in which you are a foreign partner
- You have a property manager or a U.S.-based agent collecting rent on your behalf
- You want to make the Section 871(d) net income election (see below) to reduce your tax liability
- You need to file a Form 1040-NR to claim a refund of over-withheld rental taxes
For a full overview of who qualifies for an ITIN and how to apply, our main ITIN guide for non-U.S. residents covers the entire process.
How Is U.S. Rental Income Taxed for Non-Residents? (The Two Methods)
The IRS applies two different tax treatments to rental income earned by nonresident aliens. Which method applies to you determines whether you pay tax on the full gross rent collected — or only on your net profit after expenses. This is the most financially significant decision a non-resident rental property owner faces.
- Default (no election): Gross rental income is taxed at a flat 30%, with no deductions allowed.
- With Section 871(d) election: Net rental income (gross rent minus allowable expenses) is taxed at graduated rates — the same rates that apply to U.S. residents.
Tax method
Tax rate
Deductions allowed?
Form used
Is an ITIN required?
Default — gross income (FDAP, no election)
30% flat (or lower treaty rate)
No
Schedule NEC (Form 1040-NR)
Yes
Net income election (IRC §871(d), ECI)
Graduated rates (10%–37%)
Yes
Schedule E (Form 1040-NR)
Yes
The Default Method: 30% Withholding on Gross Rental Income
By default, the IRS treats rental income received by a nonresident alien as Fixed, Determinable, Annual, or Periodical (FDAP) income. FDAP rental income is taxed at a flat rate of 30% of the gross amount collected — before any expenses are subtracted. No deductions for mortgage interest, property management fees, repairs, or depreciation are allowed under this method.
This withholding is typically collected by whoever pays the rent — either a property manager, a tenant, or a U.S. agent — and remitted to the IRS using Form 1042-S. An ITIN is required to file Form 1040-NR and reconcile these withholdings, claim any refund of over-withheld amounts, or report that the correct tax was paid.
Important: The 30% rate can be reduced if your country of residence has an income tax treaty with the United States that provides a lower rate on rental income. Not all treaties cover real property income, and treaty benefits must be claimed on Form 1040-NR with Schedule OI. An ITIN is required regardless.
The Net Income Election: IRC Section 871(d)
Nonresident alien property owners can elect, under Internal Revenue Code Section 871(d), to treat their U.S. rental income as “effectively connected income” (ECI) — the same category as business income. Under this election:
- Rental income is reported on Schedule E of Form 1040-NR (the same schedule used by U.S. residents)
- All ordinary and necessary rental expenses may be deducted
- Net income (gross rent minus expenses) is taxed at graduated U.S. rates (10%, 12%, 22%, 24%, 32%, 35%, or 37% depending on income level) — not at a flat 30%
- The withholding requirement on rental payments is eliminated once the election is in effect
The election is made by attaching a statement to your Form 1040-NR for the first year in which you want it to apply. Once made, it remains in effect for all future years unless formally revoked.
What Expenses Can You Deduct Under the Section 871(d) Election?
Once you have made the Section 871(d) election and are reporting rental income on Schedule E of Form 1040-NR, you may deduct ordinary and necessary expenses related to managing, conserving, and maintaining the rental property. Nonresident aliens cannot claim the standard deduction — all deductions must be itemized and directly related to the rental property.
Deductible expense
Notes
Mortgage interest
Interest on loans used to acquire or improve the rental property
Property management fees
Fees paid to a U.S.-based property manager or management company
Repairs and maintenance
Routine repairs — not improvements, which must be capitalized
Property taxes
U.S. state and local property taxes paid on the rental property
Insurance premiums
Landlord insurance, fire, and liability coverage
Utilities paid by the owner
Water, trash, and electricity included in rent and paid by the landlord
Depreciation
Residential property depreciated over 27.5 years under MACRS; commercial over 39 years
Advertising and listing fees
Costs to market the property (Airbnb fees, MLS listings, etc.)
Legal and professional fees
Attorney, CPA, and tax preparation fees related to the rental
Depreciation note: If you claim depreciation deductions under the Section 871(d) election, you must reduce your cost basis in the property by the amount depreciated when you eventually sell. Failing to do so is a common compliance error the IRS has specifically targeted in enforcement campaigns.
The full breakdown of which rental expenses qualify and how to claim them covers each deduction category in detail, including what documentation the IRS expects.
What Happens If You Don't Have an ITIN or Don't File?
Failing to obtain an ITIN or file a U.S. tax return does not eliminate your tax obligation — it makes it more expensive. The IRS tracks rental payments made to foreign individuals through withholding agent reports (Form 1042-S) and has run active compliance campaigns specifically targeting nonresident aliens with U.S. rental property. The consequences of not applying for an ITIN when it’s required go beyond penalties — they directly reduce the money you keep from your rental income.
What you lose without an ITIN and a filed return
Consequence
Cannot make the Section 871(d) election
Pays 30% tax on gross rent — no deductions allowed
Cannot deduct rental expenses
Pays tax on the full gross rental amount, even if expenses exceed income
Cannot claim depreciation
Misses a significant recurring deduction each year
Cannot claim over-withheld tax refund
Loses money withheld in excess of the actual tax owed
Deductions denied if the return is filed late
IRS can deny all deductions if Form 1040-NR is not filed within 16 months of the original due date
How to Report U.S. Rental Income on Form 1040-NR
Non-U.S. residents with rental income file Form 1040-NR (U.S. Nonresident Alien Income Tax Return). The schedule used depends on which tax method applies:
Tax method
Where rental income is reported
How it's taxed
Default (FDAP — no election)
Schedule NEC (Form 1040-NR)
30% flat on gross amount
Net election (Section 871(d) — ECI)
Schedule E (Form 1040-NR)
Graduated rates on net income
Filing deadlines for Form 1040-NR
Situation
Filing deadline
You received wages subject to U.S. income tax withholding
April 15
You did not receive wages subject to withholding (most rental-income-only filers)
June 15
Extension requested via Form 4868
October 15 (extension to file only — taxes still due by original deadline)
For a step-by-step walkthrough of the filing process, how non-U.S. residents file a 1040-NR tax return covers each section of the form in order.
Getting an ITIN to Report Rental Income
To obtain an ITIN as a non-U.S. resident with rental income, you file IRS Form W-7 and attach a completed Form 1040-NR (or qualify for an IRS exception to the tax return requirement). Most rental property owners do not qualify for the exceptions and must file a return alongside their ITIN application.
The key steps are:
- Prepare your Form 1040-NR showing U.S. rental income and your Section 871(d) election statement (if applicable)
- Complete IRS Form W-7 and select the appropriate reason for needing an ITIN
- Gather identity documents — a valid passport is preferred and satisfies both identity and foreign status requirements on its own. A complete breakdown of all accepted document types is available if you need to apply using alternatives to a passport.
- Submit the complete package via mail, at an IRS Taxpayer Assistance Center, or through an IRS-authorized Certifying Acceptance Agent (CAA)
- Allow 7 weeks for standard processing (9–11 weeks during tax season: January 15 to April 30, or if applying from overseas)
Using a Certifying Acceptance Agent (CAA) such as Nolly means you do not need to mail your original passport internationally. The CAA certifies identity documents on behalf of the IRS and submits your application directly.
The dedicated guide to getting an ITIN specifically for rental income walks through the application in the context of a property owner’s specific situation, including how to attach the Section 871(d) election.
Special Note for Canadian Property Owners
Canada and the United States have an income tax treaty (the Canada-U.S. Tax Convention) that may affect how rental income is taxed for Canadian residents. Under the treaty, Canadian residents who earn U.S. rental income may be eligible for a reduced withholding rate on certain types of income, but an ITIN is still required to make any treaty-based claim on a Form 1040-NR. The treaty does not eliminate the U.S. filing obligation for rental income.
Canadian owners are also frequently subject to FIRPTA withholding when they eventually sell their U.S. property. The complete resource for Canadian investors buying or selling U.S. real estate covers both annual rental income reporting and FIRPTA obligations arising at the point of sale.
Frequently Asked Questions
Does my property manager need my ITIN?
Not necessarily, but they may need to issue you a Form 1042-S if they are withholding taxes on your rental income and remitting them to the IRS. You will need your ITIN to file your annual Form 1040-NR and reconcile any amounts withheld on your behalf. If your property manager is withholding 30% of your gross rents, obtaining an ITIN and making the Section 871(d) election may allow you to recover a significant portion of those withheld funds.
Can I deduct mortgage interest on a U.S. rental property if I'm not a U.S. resident?
Yes — but only if you have made the Section 871(d) election to treat your rental income as effectively connected income. Under the default gross income method, no deductions of any kind are allowed. Once you make the election and file Schedule E, mortgage interest paid on loans to acquire or improve the property is deductible.
Do I need an ITIN if I only rented out my property for part of the year?
Yes, if you received any U.S.-source rental income during the year and you are a nonresident alien for tax purposes. Even partial-year rental income from a U.S. property is subject to U.S. tax reporting. An ITIN is required to file Form 1040-NR for that tax year.
What is Form 1042-S, and how does it relate to my rental income?
Form 1042-S (Foreign Person’s U.S. Source Income Subject to Withholding) is issued to you by the withholding agent — typically your property manager or tenant — showing the gross rental income paid to you and the amount of tax withheld. You use this form when completing your Form 1040-NR to report income and claim a credit for taxes already withheld. An ITIN is required to receive and use Form 1042-S correctly on your tax return.
Can I rent out my U.S. property through Airbnb or Vrbo as a non-resident?
Yes. Short-term rental income from platforms like Airbnb or Vrbo is treated the same as long-term rental income for U.S. tax purposes when earned by a nonresident alien. The same ITIN and Form 1040-NR requirements apply. Airbnb is a U.S. payer and may be required to withhold taxes on payments to foreign hosts depending on the documentation you provide.
Is rental income the only type of U.S. income that requires an ITIN?
No. An ITIN is required for any U.S.-source income that triggers a federal tax filing or reporting obligation — including investment income from U.S. stocks and dividends, freelance income, business income, and proceeds from the sale of U.S. property subject to FIRPTA withholding.
What if I didn't file in previous years?
The IRS allows nonresident aliens to make the Section 871(d) election retroactively by filing amended Form 1040-NR returns for prior years. However, deductions may be denied if the return is filed more than 16 months after the original due date. It is strongly advisable to consult a tax professional about late filing and any potential penalties before submitting.
Get Your ITIN and U.S. Rental Tax Return Right
Nolly (U.S. Tax Recovery Inc.) is an IRS-authorized Certifying Acceptance Agent serving non-U.S. residents worldwide from Toronto, Ontario, Canada. Nolly handles the complete process for rental property owners — including ITIN application, Section 871(d) election, Schedule E preparation, and annual Form 1040-NR filing.
Sources
All factual claims in this article are sourced from official IRS publications:
- IRS.gov — Taxation of Nonresident Aliens
- IRS.gov — Nonresident Aliens: Real Property Located in the U.S. (IRC §871(d))
- IRS.gov — Instructions for Form 1040-NR (2025)
- IRS.gov — NRA Withholding
- IRS Publication 519 — U.S. Tax Guide for Aliens (2025)
- 26 U.S.C. § 871 — Tax on Nonresident Alien Individuals (Cornell LII)
