Foreign buyers close on Florida condominiums every day without realizing that United States tax law treats those units very differently than property held by American citizens. Strategies to reduce estate tax would need to be employed in order to make Florida property ownership a viable choice for many non-US citizens. This is because a non-US citizen who is not domiciled in the United States receives a federal estate tax exemption of only $60,000 on American assets, while a US citizen currently receives an exemption of $15 million.

A single Miami condominium can therefore trigger a substantial federal tax bill at the owner’s death. How the property is titled at closing affects that outcome more than any later decision.

Why a Florida Condominium Is Taxed at All

United States real estate is always treated as property situated within the country. Citizenship and banking location make no difference. What matters is domicile at death, a different test than the one used for income taxes. Someone who lives in Bogota and visits Florida twice a year remains a nonresident, and the condominium stays fully exposed.

The property is valued at fair market value on the date of death, not at the price originally paid. If all United States assets exceed $60,000, the estate must file a federal return. That threshold has not been adjusted for inflation in decades, and it now captures nearly every condominium purchase in South Florida.

What the Estate Tax Actually Costs

Federal estate tax rates are graduated, running from 18% to a top rate of 40%. The 40% figure applies only to amounts above the highest bracket, so a smaller estate is not taxed at that rate across the board. A condominium worth $750,000 held directly by a nonresident leaves roughly $690,000 taxable after the exemption, and the liability commonly reaches into the hundreds of thousands of dollars.

Deductions apply for unpaid mortgages, liens, and administration expenses, and payment is due within nine months of death. Until the tax is resolved, heirs often cannot sell or transfer the unit.

Florida Does Not Impose Its Own Estate Tax

Chapter 198 of the Florida Statutes governs estate taxes in the state. Section 198.03 addresses estates of nonresident decedents and Section 198.04 addresses estates of alien decedents. Both are tied to a federal credit for state death taxes that no longer exists, so Florida collects nothing. Section 198.13 relieves the personal representative of the filing obligation when that credit is unavailable. The exposure is entirely federal, and planning should be aimed there.

A Single-Member LLC Does Not Reduce Estate Tax

This is the most common and most expensive misunderstanding among foreign buyers. A limited liability company with one owner is generally disregarded for federal tax purposes. The Internal Revenue Service looks straight through the company to the real estate, and the condominium remains an American asset inside the estate. A Florida limited liability company formed under Chapter 605 offers real benefits in liability protection and privacy, but eliminating estate tax is not among them.

“A Florida limited liability company formed under Chapter 605 offers real benefits in liability protection and privacy, but eliminating estate tax is not among them.”

Foreign Corporations and Layered Structures

Shares in a corporation organized outside the United States are not treated as American property. When a foreign corporation owns the condominium, the estate holds stock in a non-US company rather than Florida real estate, and the estate tax problem largely disappears. It is most often used for larger purchases, sometimes with a United States corporation beneath a foreign parent.

The trade-offs are significant. Sales by foreign corporations face withholding under the Foreign Investment in Real Property Tax Act. Corporate rates apply to rental profits, favorable long-term capital gains treatment is lost, a branch profits tax may apply, and heirs receive no step-up in basis at death. For a modest vacation unit, these burdens can exceed the tax they were meant to prevent, which is why an experienced Florida attorney should model the full cost first.

Trusts, Debt, and Treaty Relief

An irrevocable trust established outside the United States can also remove the property from the taxable estate, but only if carefully built. It must be organized in a non-US jurisdiction, must not give a United States fiduciary control over substantial decisions, and must limit the powers retained by its creator. A revocable trust accomplishes nothing here. A Florida revocable living trust under Chapter 736 still avoids the ancillary probate proceeding that direct ownership forces on a foreign family, but it does not reduce the tax.

Qualifying mortgage debt secured by the property reduces the taxable value. Estate tax treaties can help as well, sometimes replacing the $60,000 exemption with a prorated share of the much larger citizen exemption. The catch matters enormously in South Florida: the United States has no estate tax treaty with Brazil, Colombia, Venezuela, Argentina, Mexico, or China, so buyers from those countries cannot rely on treaty relief at all.

Florida Law Restricts Some Buyers Regardless of Structure

Part III of Chapter 692 of the Florida Statutes restricts real property purchases by foreign principals connected to designated countries of concern. The law reaches any person or entity holding a controlling interest in a corporation, partnership, or trust formed to own Florida real property, so a holding company offers no escape. Federal rules separately require disclosure of the individuals behind entities and trusts in non-financed residential purchases. It is highly recommended that buyers confirm eligibility and reporting obligations before signing a contract rather than after.

South Florida Law

A structure chosen casually at closing can cost an international family a large share of the property decades later. Attempting to sort this out alone, with online forms or informal advice, is how most of these problems begin.

As a premier estate planning law firm, South Florida Law assists international buyers with Florida real estate transactions, entity formation, estate planning, trust drafting, probate and ancillary administration, and title services. We coordinate with tax counsel on cross-border issues.

To discuss a Florida condominium purchase or a property already held by a non-US owner, call (954) 900-8885 or reach out via our contact form.