Your principal residence on Bonaire
2017-05-10

We're often asked how you should title the ownership of real property on Bonaire. In the US rental real estate is often owned by a single member LLC. Direct ownership or joint ownership are the most common for your home, with some clients owning such property in a revocable grantor trust ("living trust.") In most states, the ownership through such a trust will not cause problems with special tax rates and exemptions for homesteads. But it's almost never wise to put your principal residence in an LLC. Doing so would cause the ownership to be separated from you, and as a result the gain on sale will not qualify for the $250,000/$500,000 exclusion and you will lose the ability to deduct mortgage interest and real estate taxes on Schedule A.

On Bonaire it is also not advisable to own your principal residence through an LLC, for reasons in addition to the loss of US tax benefits above. If you own your principal residence directly, you can qualify for the lower property tax rate, "grondbelasting," which is currently 0.315% of the assessed value/year. If you own the principal residence through an LLC it will be treated as owned by an entity separate from the person living there and will be taxed at the higher "vastgoedbelasting" rate which is currently 0.805%/year (over the $70,000 tax free amount.)

If you have questions about how to set up title to property you are buying on Bonaire, please give us a call or use the contact page to send us a message.

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