You Own a Florida Rental Property. You Live Abroad. Now What?

If you’re a foreign national with rental property in Florida, your U.S. filing deadline is not something you can afford to ignore. The IRS expects a Form 1040-NR from you, and getting it wrong (or not filing at all) can cost you thousands in penalties, lost deductions, and surprise withholding that eats into your returns.

The good news? You don’t necessarily need to spend $500+ on a CPA to file. There are low-cost and even free ways to get your 1040-NR filed correctly, if you know what you’re doing. This guide covers the Section 871(d) election that saves most NRAs real money, the schedules you need, and the filing options available right now.

By the end, you’ll understand what forms to file, which deductions to claim, and how to submit your return without overpaying in taxes or in preparation fees.

Who Needs to File Form 1040-NR?

A nonresident alien (NRA) is anyone who isn’t a U.S. citizen and hasn’t passed either the green card test or the substantial presence test. If that’s you, and you earn income from a rental property in the United States, you have a filing obligation.

The IRS requires you to file Form 1040-NR if:

• You’re engaged (or considered engaged) in a trade or business in the U.S.
• You have U.S.-source income where tax wasn’t fully withheld at the source
• You want to claim a refund of overwithheld taxes
• You want to claim deductions or credits against your U.S. income

That last point is big. If your property manager withholds 30% of your gross rental income (as required by default for NRAs), you’re likely overpaying by a wide margin. Filing 1040-NR is how you get that money back.

The Filing Deadline

If you have U.S. wages subject to withholding, the deadline is usually April 15. But most NRA rental property owners don’t have U.S. wages. They just collect rent. In that case, the filing deadline is often June 15, and you don’t need a separate extension just to reach that date.

One catch: if you owe tax, interest can still start accruing from April 15. So even when the return itself is due later, earlier is better.

The 30% Trap: Why Most NRAs Overpay

By default, rental income paid to a nonresident alien is classified as FDAP income (Fixed, Determinable, Annual, or Periodical). The tax on FDAP income is a flat 30% of gross receipts. No deductions allowed. No expenses subtracted.

Say your Florida vacation rental brings in $60,000 per year in gross rent. Under the default FDAP rules:

• Gross rent: $60,000
• Tax at 30%: $18,000
• Deductions allowed: $0

But your actual expenses (property management fees, insurance, repairs, mortgage interest, property taxes, depreciation) might total $45,000. Your real net income is only $15,000. At graduated rates, you’d owe roughly $1,600 in tax instead of $18,000.

That’s a $16,400 difference. The mechanism that makes this possible is the Section 871(d) election.

The Section 871(d) Election: Your Most Important Tax Decision

IRC Section 871(d) lets an NRA elect to treat rental income from U.S. real property as effectively connected income (ECI) with a U.S. trade or business. Once you make this election, your rental income gets taxed at the same graduated rates that apply to U.S. citizens and residents. And you can deduct all ordinary and necessary expenses.

How to Make the Election

You make the 871(d) election by attaching a statement to your Form 1040-NR. The statement needs to include:

• A declaration that you’re making the election under IRC Section 871(d)
• A complete list of all U.S. real property you own (with legal descriptions)
• The extent of your ownership in each property
• The location of each property
• A description of any major improvements
• Dates of ownership
• Income from each property

Once you make this election, it stays in effect for all future tax years until you revoke it. For most NRA rental property owners in Florida, there’s no good reason to revoke it. The graduated-rate treatment almost always results in lower taxes.

The W-8 ECI Form

After making the 871(d) election, you need to give your property manager (or whoever pays you rent) a Form W-8 ECI instead of a W-8 BEN. That tells them to stop withholding 30% on your gross rent. You’ll now be reporting and paying tax on the net income through your 1040-NR.

This step is often missed. If your property manager is still withholding 30% even after you’ve made the election, you’ll get the overpayment back when you file. But it’s better to fix the withholding from now on.

Form 1040-NR: How to File With Florida Rental Income

Here’s what the actual filing looks like when you have Florida rental property income as an NRA with an 871(d) election in place.

First, Gather Your Documents

Before you start filling out anything, collect:

• Form 1042-S, which shows any tax withheld on your rental income
• Rental income statements from your property manager (monthly or annual summary)
• Expense records: management fees, repairs, insurance, utilities, HOA fees
• Mortgage interest statement (Form 1098, if applicable)
• Property tax records from the county tax collector
• Depreciation schedule. If this is your first year, you’ll need the property’s purchase price and the split between land and building
• ITIN or SSN. You need a taxpayer identification number to file

Next, Complete Schedule E (Supplemental Income)

Schedule E is where your rental property income and expenses live. For each property, you’ll report:

• Property address and type (single family, condo, etc.)
• Number of days rented at fair market value
• Number of days used for personal purposes
• Gross rental income received

Then list your deductible expenses:

• Advertising, like Airbnb and VRBO listing fees
• Auto and travel for trips to inspect the property (limited for NRAs)
• Cleaning and maintenance: turnover cleaning, pool service, landscaping
• Insurance (property, liability, windstorm)
• Legal and professional fees: CPA fees, attorney fees related to the rental
• Management fees, typically 20-35% for Florida vacation rentals
• Mortgage interest
• Repairs (A/C fixes, plumbing, appliance replacement)
• Taxes, meaning Florida property taxes (no state income tax in FL, which helps)
• Utilities like electric, water, internet, cable
• Depreciation: residential property is depreciated over 27.5 years

Your net rental income (or loss) from Schedule E flows to page 1 of Form 1040-NR.

Then Fill Out Form 1040-NR

On the main form, you’ll report your effectively connected income from Schedule E. Here’s what matters:

• Page 1: Your income from Schedule E goes on line 5 (rental real estate, royalties, partnerships, S corps)
• Deductions: NRAs can claim itemized deductions connected to ECI. For rental property owners, this usually means state and local taxes (though Florida has none) and other deductions tied directly to your U.S. business activity
• Tax computation: Apply the graduated tax rates to your taxable income
• Credits: Claim any withholding shown on Form 1042-S

Attach the 871(d) Election Statement

If this is your first year making the election, attach the statement described above. If you already made it in a prior year, you don’t need to attach it again, though referencing it is a good idea.

File the Return

You can file Form 1040-NR electronically or by mail. If mailing, send it to:

Department of the Treasury
Internal Revenue Service
Austin, TX 73301-0215

If you’re including a payment, the address is Austin, TX 73301-0015 instead.

Can You Really File for Free?

Here’s the honest answer: truly free e-filing of Form 1040-NR with Schedule E is very limited. But there are options at every budget level.

Free Options

• IRS paper filing: You can download Form 1040-NR, Schedule E, and all related forms from IRS.gov, fill them out by hand, and mail them. Cost: $0 (plus postage). The downside is it’s slow, error-prone, and your refund won’t arrive for 6-8 weeks or longer.
• IRS Free File: The IRS Free File program is designed for Form 1040 filers with AGI under $84,000. It does not support Form 1040-NR. Off the table for NRAs.
• VITA/TCE: The IRS Volunteer Income Tax Assistance program offers free tax prep, but it’s geared toward simple returns and usually doesn’t handle NRA filings with rental income.

Low-Cost Options ($0-$60)

• FreeTaxUSA: Federal filing is free ($0), and state returns run about $15. Some users have reported filing 1040-NR with rental income through this platform. Worth testing. Create an account and walk through the interview to see if it supports your situation before committing.
• TaxAct: Their nonresident filing option runs $60-$120 for federal. Supports 1040-NR and Schedule E.

NRA-Focused Filing ($50-$200)

• Sprintax: The most widely used platform for NRA tax prep, built from the ground up for Form 1040-NR. Handles rental income, treaty benefits, and e-filing. Federal filing runs $50-$100 depending on complexity. Many universities subsidize Sprintax for students on F/J/M visas, but property owners pay full price.

Professional Preparation ($300-$1,000+)

• CPA or Enrolled Agent: If you have multiple properties, complex ownership structures (like an LLC), FIRPTA withholding to recover, or multi-year returns to catch up on, professional help is worth the investment. A specialist in NRA real estate taxation will know how to maximize your deductions and handle the 871(d) election properly.

Depreciation: The Deduction Most NRAs Miss

Depreciation is one of the largest deductions available to rental property owners, and many NRAs either miss it or calculate it wrong.

When you buy a residential rental property, the IRS lets you deduct the cost of the building (not the land) over 27.5 years. This is a non-cash deduction. You reduce your taxable income without spending any additional money.

Example

You purchased a Florida condo for $300,000. The county property appraiser values the land at $60,000 and the building at $240,000.

• Annual depreciation: $240,000 ÷ 27.5 = $8,727
• Monthly depreciation: $727

That’s $8,727 subtracted from your rental income every year for nearly three decades. On a property with $15,000 in net income before depreciation, this could bring your taxable rental income down to around $6,273, and your tax bill drops with it.

One thing to know: if you sell the property later, the IRS will “recapture” this depreciation and tax it at up to 25%. But that’s a future problem. The time value of keeping that money now (earning returns on it, reinvesting it) typically outweighs the future recapture cost.

Florida-Specific Considerations

Florida makes things simpler in some ways and more complex in others.

What Works in Your Favor

• No state income tax. Florida doesn’t tax rental income, so you only deal with the federal return. No state 1040-NR equivalent to worry about.
• Strong rental market. The Orlando/Kissimmee vacation rental corridor generates consistent income, giving you solid numbers to report.

What You Still Need to Handle Separately

• Tourist Development Tax (TDT): Counties like Osceola, Orange, and Polk charge a TDT on short-term rentals (typically 5-6%). This is separate from your income tax return and filed with the county.
• Florida Sales Tax: Short-term rentals (less than 6 months) are subject to Florida’s 6% sales tax plus any county discretionary surtax. Filed with the Florida Department of Revenue.
• Business Tax Receipt: Most counties require a local business license for rental operations.

None of these Florida taxes go on your 1040-NR, but they’re deductible expenses on Schedule E. Keep every receipt and filing confirmation.

Common Mistakes That Cost NRAs Money

• Not making the 871(d) election. Without it, you’re stuck paying 30% on gross income. This is the single most expensive mistake an NRA rental property owner can make.
• Filing late and losing deductions. The IRS can deny all deductions and credits if your return is filed more than 16 months after the due date. File on time.
• Forgetting depreciation. Under IRS rules, you must claim depreciation whether you take it or not. The recapture applies either way. So not claiming it means paying more tax now AND later.
• Not updating the W-8 ECI. If your property manager has an expired or incorrect W-8 form, they’ll withhold 30% on your gross rent. Make sure your W-8 ECI is current.
• Ignoring ITIN requirements. You need an Individual Taxpayer Identification Number to file. If you don’t have one, apply with Form W-7. You can submit it with your tax return.

The Bottom Line

• NRAs with Florida rental income must file Form 1040-NR. The deadline is June 15 for those without U.S. wages, but interest accrues from April 15 if you owe
• The Section 871(d) election is almost always worth making. It switches you from a flat 30% on gross income to graduated rates on net income
• Schedule E is where your rental income and deductions live. Claim everything: management fees, repairs, insurance, and above all depreciation
• Truly free e-filing for 1040-NR is very limited, but paper filing costs nothing and low-cost software like FreeTaxUSA or Sprintax starts around $50
• File on time. The IRS can strip all your deductions if you’re more than 16 months late

How Celeraxiom Can Help

At Celeraxiom, we work with foreign nationals who own U.S. rental properties. From the 871(d) election to Schedule E prep to FIRPTA withholding recovery, we handle the full picture so you keep more of your rental income and stay on the right side of the IRS.

Frequently Asked Questions

Can nonresident aliens use TurboTax to file Form 1040-NR?

No. TurboTax does not support Form 1040-NR. TurboTax partners with Sprintax for nonresident filings, so you’ll be redirected to Sprintax’s platform. Sprintax was built for NRA tax returns and supports e-filing of 1040-NR with rental income schedules.

What happens if I don’t file a 1040-NR for my Florida rental property?

If your property manager is withholding 30% of your gross rent, not filing means you lose any chance of getting that overwithheld amount back. Beyond that, failure to file carries penalties of 5% per month on unpaid tax (up to 25%), plus interest. The IRS can also deny all deductions if you file more than 16 months late, meaning you’d owe 30% on gross income with zero deductions.

Do I need an ITIN to file Form 1040-NR?

Yes. If you don’t have a Social Security Number, you need an Individual Taxpayer Identification Number (ITIN). Apply using Form W-7, which you can submit along with your 1040-NR. Processing takes 7-11 weeks. If your property manager needs a tax ID for withholding purposes, get your ITIN sorted as early as possible.

Is the 871(d) election permanent?

It stays in effect until you revoke it. You can revoke by filing an amended return (Form 1040-X) within 3 years of the original filing. After that window closes, you need IRS approval. For most rental property owners, there’s no reason to revoke. The graduated rate treatment beats the flat 30% in nearly every scenario.

Can I deduct property management fees on my 1040-NR?

Yes, and you should. Property management fees are one of the largest deductible expenses for Florida vacation rental owners. Whether you pay 20%, 25%, or 35% of gross rent to your manager, every dollar is deductible on Schedule E. This also includes booking platform fees from Airbnb, VRBO, and Booking.com.