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Manage the Asset

Property ownership overseas can trigger particular tax liabilities. I've discussed taxes that can be associated with purchasing real estate in a foreign country. However, once you've made the investment, you can also have ongoing associated tax burdens. I'll address the generic ones first (that is, the ones that apply to everyone). Then I'll walk you through the specific U.S. tax implications you'll face as an American buying property overseas.

The most obvious ongoing tax associated with owning a piece of property anywhere is property tax. The good news is that not all countries impose one. If your frame of reference is a U.S. state where the property taxes are high, this can be another nice benefit of diversifying overseas in this way.

Property taxes in many countries are managed at the local level—by the municipality, as it were, which oversees collections and sometimes sets the rates. This means that, depending on the country, you may need to know where, exactly, you'll be buying before you can know what your property tax rates might be. Generally speaking, though, property taxes are lower most everywhere in the world than the U.S. average, and, again, not all countries charge them.

Sometimes, a country will exempt certain kinds of properties or certain kinds of purchases from property tax for certain periods of time, to encourage investment. This was the case in Panama over the past two decades or so, when the government offered a 20-year tax exemption ...

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