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Income From Real Property: U.S. Taxes for Noncitizens (2025 IRS Guide)

This guide covers “Income From Real Property” within u.s. taxes for noncitizens. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.

Adapted from Publication 519 (2025), U.S. Tax Guide for Aliens, published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.

Context for these rules

A nonresident alien’s income that is subject to U.S. income tax must be divided into the following two categories.

The difference between these two categories is that effectively connected income, after allowable deductions, is taxed at graduated rates. These are the same rates that apply to U.S. citizens and residents. Income that is not effectively connected is taxed at a flat 30% (or lower treaty) rate.

Income From Real Property

If you have income from real property located in the United States that you own or have an interest in and hold for the production of income, you can choose to treat all income from that property as income effectively connected with a trade or business in the United States. The choice applies to all income from real property located in the United States and held for the production of income and to all income from any interest in such property. This includes income from rents, royalties from mines, oil or gas wells, or other natural resources. It also includes gains from the sale or exchange of timber, coal, or domestic iron ore with a retained economic interest.

You can make this choice only for real property income that is not otherwise effectively connected with your U.S. trade or business.

If you make the choice, you can claim deductions attributable to the real property income and only your net income from real property is taxed.

This choice does not treat a nonresident alien, who is not otherwise engaged in a U.S. trade or business, as being engaged in a trade or business in the United States during the year.

Example.

You are a nonresident alien and are not engaged in a U.S. trade or business. You own a single-family house in the United States that you rent out. Your rental income for the year is $10,000. This is your only U.S. source income. As discussed earlier under The 30% Tax, the rental income is subject to a tax at a 30% (or lower treaty) rate. You received a Form 1042-S showing that your tenants properly withheld this tax from the rental income. You do not have to file a U.S. tax return (Form 1040-NR) because your U.S. tax liability is satisfied by the withholding of tax.

If you make the choice discussed earlier, you can offset the $10,000 income by certain rental expenses. (See Pub. 527.) Any resulting net income is taxed at graduated rates.

If you make this choice, report the rental income and expenses on Schedule E (Form 1040). Enter the net rental income or loss from Schedule E (Form 1040) on Schedule 1 (Form 1040), Part I, line 5. Attach Schedule 1 (Form 1040) and Schedule E (Form 1040) to Form 1040-NR. For the first year you make the choice, also attach the statement, discussed below.

Making the choice.

Make the initial choice by attaching a statement to your return or amended return for the year of the choice. Include the following in your statement.

  • That you are making the choice.

  • Whether the choice is under section 871(d) (explained earlier) or a tax treaty.

  • A complete list of all your real property, or any interest in real property, located in the United States. Give the legal identification of U.S. timber, coal, or iron ore in which you have an interest.

  • The extent of your ownership in the property.

  • The location of the property.

  • A description of any major improvements to the property.

  • The dates you owned the property.

  • Your income from the property.

  • Details of any previous choices and revocations of the real property income choice.

This choice stays in effect for all later tax years unless you revoke it.

Revoking the choice.

You can revoke the choice without IRS approval by filing Form 1040-X for the year you made the choice and for later tax years. You must file Form 1040-X within 3 years from the date your return was filed or 2 years from the time the tax was paid, whichever is later. If this time period has expired for the year of choice, you cannot revoke the choice for that year. However, you may revoke the choice for later tax years only if you have IRS approval. For information on how to get IRS approval, see Regulations section 1.871-10(d)(2).

Note:

You can file Form 1040-X electronically with tax filing software to amend Forms 1040, 1040-SR, and 1040-NR. Generally, for a credit or refund, you must file Form 1040-X within 3 years (including extensions) after the date you filed your original return or within 2 years after the date you paid the tax, whichever is later. For more information, go to IRS.gov/Form1040X.

Using the guidance

Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.

Sources and further reading

The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.

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