US taxes help needed for uk citizen

Hi there. I'm British and live in the Uk. Recently married, my wife is American and now lives in England with me.

I have a holiday home in Arizona which for the first time is now rented for the next 3 years.

How do I go about paying US taxes? Is there a particular percentage of the income recieved I will have to pay? Any additional info most welcome.

Cheers

First you need to decide whether to file US taxes with your wife or separately. It's usually easier to file separately when there is a US citizen spouse.

For your AZ rental income you will need to file a 1040NR for Federal taxes and probably an AZ state non-resident tax form too. You'll pay tax on the rental income as it is US sourced and then get a credit for that tax on your UK taxes.

It is slightly more complicated than that. You will need to apply for an ITIN; you will then have to decide if you want to make the net election.  Next you will need to file both US Federal and State tax returns; including figuring out the depreciation expense.

In the UK you will need to register for self-assessment and file UK returns using the accrual method of accounting; do bear in mind that UK government policy restricts your ability to deduct mortgage interest; which is not a problem in the States.

Separately, presumably you have some life insurance to cover the cost of US estate tax if you die while owning the property. As you are not a US citizen, the estate tax exemption is only US$60,000.

also remember that the tax deduction principles are different between the US and the UK, so ensure that you keep good monthly records to track the income and expense categories for each of the different tax years at the prevailing exchange rates

If you are a not a US person, why not transfer the property to your US citizen spouse?