Managing a Massachusetts rental from abroad

Who these rules apply to, and two ways rent is taxed

These rules are for a nonresident alien: someone who is not a US citizen and does not meet the green card test or the substantial presence test. A US citizen living abroad, or a person who meets either test, is taxed the way US citizens are, so the rules below do not apply.

IRS Publication 519 explains the default for a nonresident alien whose rent is not otherwise connected with a US trade or business. Rent from US real estate is taxed at 30% of the gross amount, or at a lower rate if a tax treaty provides one, with no deductions. Under Publication 515, the tax is withheld by the withholding agent, meaning anyone who has control, receipt or payment of the rent. That can be the tenant, or a property manager who collects rent for you.

The alternative is to choose to treat all income from US real property held for the production of income as effectively connected with a US trade or business. You can then deduct expenses such as mortgage interest, property tax, insurance, repairs and depreciation, and only the net income is taxed at the graduated rates. The choice itself is made by attaching a statement to your return, or an amended return, for the first year it applies; it states that you are making the choice, whether under section 871(d) or a treaty, and lists your US real property. Form W-8ECI is a separate step: it is a certificate you give the tenant or manager so they stop withholding at 30%. The rental is reported on Schedule E with Form 1040-NR.

The choice covers all of your US rental real estate and stays in effect for later years unless you revoke it. To claim deductions, you must file a timely and accurate return. For a nonresident without US wages, the due date is the 15th day of the sixth month after the tax year ends, which is June 15 for a calendar year.

Getting an ITIN

Form W-8ECI is not valid without a taxpayer identification number. The IRS instructions say that if you do not have an SSN and are not eligible for one, you need an ITIN, which you request on Form W-7.

The IRS asks most applicants to send Form W-7 together with the federal tax return it is needed for, on or before the return’s due date. Its ITIN page says to allow 7 weeks, and 9 to 11 weeks during tax season, from January 15 to April 30, or when applying from overseas. Build that time into your first year, since the W-8ECI cannot be completed until the number arrives.

You can apply by mail, in person at an IRS Taxpayer Assistance Center that offers ITIN service, or through a Certifying Acceptance Agent, including agents located outside the US. Applying in person lets most supporting documents be authenticated and handed back on the spot. Taxpayer Assistance Centers are free; Certifying Acceptance Agents charge a fee.

The Massachusetts return

Massachusetts taxes nonresidents on income from Massachusetts sources, and the Department of Revenue lists income from owning real property in Massachusetts as Massachusetts-source income. Nonresidents file Form 1-NR/PY.

In the DOR guide for tax year 2025, a nonresident must file if Massachusetts-source income was more than $8,000, or more than the personal exemption multiplied by the ratio of Massachusetts-source income to total income. Deductions for a nonresident are generally allowed only when they relate directly to income reported on the Massachusetts return.

The federal and state returns use much of the same information, so it helps to have one preparer handle both. Keep a single file for each year with the rent ledger, expense receipts, the property tax bills, the insurance policy and the mortgage interest statement.

When you sell

Under FIRPTA, a buyer who purchases US real property from a foreign person generally must withhold 15% of the amount realized and send it to the IRS with Forms 8288 and 8288-A. In most cases the buyer is the withholding agent, and the closing attorney handles the paperwork.

The amount withheld is not necessarily the tax you owe. You report the sale on your US return for the year the sale took place. When the expected tax is much lower than 15%, you can apply to the IRS for a withholding certificate that lets the buyer withhold a reduced amount; apply well before closing. The reduced rates and exceptions for buyers who will live in the home are covered in the seller tax guide.

Running the home from a distance

Someone local has to be reachable. Boston’s rental registration requires an owner who lives outside Massachusetts to name a Boston-area person the city can contact in an emergency. The State Sanitary Code requires an owner who does not live in the building to post the name, address and phone number of the owner or manager, and that phone must be checked at least every 12 hours. The lease must also give tenants the name, address and phone number of the owner, of the person responsible for maintenance, and of the person who receives notices.

If a property manager handles the home, put the arrangement in a written agreement: who collects rent, how much a repair can cost before they must ask you, how often they inspect, how the monthly statement looks, and who keeps the security deposit records. Ask for invoices and photos with every repair, which makes the year-end tax file easier to put together.

A security deposit must be held in a separate, interest-bearing account in a bank located in Massachusetts, protected from the owner’s creditors, and the tenant must get a receipt naming the bank, the amount and the account number within 30 days. Set up that account before the first lease is signed.

Tell your insurer the home is rented and confirm the policy is written for that use. The owner’s policy does not cover the tenant’s belongings, so asking tenants to carry renters insurance protects both sides.