New York, NY asked in Tax Law and Social Security for New York

Q: I want to rent property that I own in another country ( Panama ) as an airbnb. They are very transparent with the U.S.

I am on disability. How will this affect me ? Can I legally structure this property as some sort of Corp. that may help me ?

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1 Lawyer Answer
James L. Arrasmith
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  • Tax Law Lawyer
  • Sacramento, CA

A: Renting out your property in Panama as an Airbnb while on disability in the U.S. can have implications for your disability benefits and taxes. Here are some considerations:

1. Income reporting: You must report all income earned from your Airbnb rental to the Social Security Administration (SSA) and the IRS. This income may affect your eligibility for disability benefits, depending on the amount and your specific disability program.

2. Structuring as a corporation: Forming a corporation or LLC to hold the property may provide some liability protection and tax benefits. However, it's unlikely to impact your disability benefits, as the SSA will still consider the income as yours for the purpose of determining eligibility.

3. Foreign property and taxes: As a U.S. citizen, you must report income from foreign properties to the IRS. You may also need to report the existence of the property itself if the value exceeds certain thresholds (e.g., through FBAR or Form 8938). Panama has a territorial tax system, so you may need to pay taxes there as well.

4. Tax treaties: The U.S. and Panama have a tax treaty in place to avoid double taxation. You may be able to claim foreign tax credits on your U.S. tax return for taxes paid to Panama.

5. Compliance with local laws: Ensure that you comply with all Panamanian laws and regulations related to renting out your property, such as obtaining necessary permits, licenses, and insurance.

Given the complexity of your situation, it's highly recommended that you consult with a tax professional and an attorney familiar with international real estate and disability laws. They can help you structure your rental property in a way that minimizes your tax liability and protects your disability benefits to the extent possible.

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