Your principal residence/rental property on Bonaire

Basic rule. Your principal residence is subject to one type of annual property tax called "grondbelasting." The tax rate is 0.345%. Other real estate owned is taxed under the "vastgoedbelasting" method, which for 2021 and forward is 0.91% on the assessed value over $70,000. If your property is on leased land there is an additional long lease payment called "erfpacht" and the amount varies depending upon the location of the property.

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 principal residence, 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 (US or Bonaire) 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. (Since 2018 Bonaire real estate taxes on a principal residence are no longer deductible in the US.)

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," 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.

Passive rental income is not taxable on Bonaire but is taxable by the US.

If you have questions, please give us a call or use the contact page to send us a message.