Passive income with ITIN — rentals, dividends, interest

Passive income — rent, interest, dividends, capital gains, royalties — is reported by ITIN filers on the same schedules, at the same rates, as filers with a Social Security number. If you live in the US and meet the substantial presence test, you are a resident alien for tax purposes, and the Form 1040 you file with your ITIN must include worldwide income from every passive source. What changes for ITIN holders is not the tax math but the paperwork around it: estimated payments nobody withholds for you, an ITIN that can expire between filings, and a property-sale withholding rule (FIRPTA) that buyers sometimes apply to the wrong people. If you’re new to filing, start with filing taxes with an ITIN.

Rental income: Schedule E and depreciation

Rental income from real estate goes on Schedule E (Form 1040) — not Schedule C, unless you provide substantial services to tenants (daily cleaning, meals), which turns it into a business. Rental income is broader than monthly rent: the IRS counts advance rent in the year received, lease-cancellation payments, expenses a tenant pays on your behalf, and security deposits you keep for damage or early termination. Deposits you expect to return are not income.

Against that income you deduct mortgage interest, property taxes, insurance, repairs, and operating costs. The largest deduction for most landlords is depreciation: under IRS Publication 527, residential rental property is depreciated over 27.5 years, straight-line, using a mid-month convention, reported on Form 4562. On a building (not land) worth $200,000, that is roughly $7,270 per year of paper deduction. Two cautions: depreciation begins when the property is placed in service, and rental losses are limited by the passive activity rules in Publication 925 — losses you can’t use now carry forward.

Interest, dividends, and Schedule B

Banks report interest of $10 or more on Form 1099-INT; brokers report dividends of $10 or more on Form 1099-DIV. You must report all taxable interest even when no form arrives. The threshold to remember: if your taxable interest or ordinary dividends exceed $1,500 for the year, you must attach Schedule B listing each payer. Schedule B is also mandatory — regardless of amount — if you had a financial interest in or signature authority over a foreign account, which is common for immigrants keeping a bank account in their home country. Interest is taxed as ordinary income; qualified dividends get the lower capital-gains rates. An ITIN works the same as an SSN on these forms, and certifying it on Form W-9 with your bank or broker prevents 24% backup withholding.

Capital gains and royalties

Sales of stock, funds, crypto, or property are detailed on Form 8949 and summarized on Schedule D. Assets held more than one year qualify for long-term rates of 0%, 15%, or 20% — for tax year 2025, the 0% rate reaches taxable income of $48,350 (single) and $96,700 (married filing jointly). Short-term gains are taxed as ordinary income. If losses exceed gains, you deduct up to $3,000 against other income and carry the rest forward indefinitely. Royalty income — from minerals, copyrights, or licensing — is reported on Schedule E alongside rentals.

Estimated taxes: Form 1040-ES, four times a year

No one withholds tax from rent checks or brokerage gains. If you expect to owe $1,000 or more when you file, the IRS requires quarterly estimated payments using Form 1040-ES — typically four installments across the year (the form lists each deadline). The safe harbor: pay at least 90% of this year’s tax or 100% of last year’s tax, whichever is smaller, and you avoid the underpayment penalty. The penalty can apply even if you ultimately receive a refund, because the IRS tests each quarter separately. You can pay online through your IRS account, by mail with the 1040-ES voucher, or through the IRS2Go app — an ITIN works in all of these channels.

The ITIN renewal trap

An ITIN that does not appear on a US federal tax return for three consecutive tax years expires on December 31 after the third year. Passive-income earners hit this trap in a specific way: the IRS allows an expired ITIN to keep appearing on information returns like 1099-INT and 1099-DIV, so your bank and broker never complain — but the moment you need to file a return (say, to report a property sale), the expired ITIN holds up processing and any refund. Renewal uses Form W-7, checking “Renew an existing ITIN” — see how to renew; a first-time applicant’s W-7 must be packaged with a tax return, not filed separately (how to apply).

FIRPTA: the 15% withholding that doesn’t apply to residents

When a foreign person sells US real estate, the buyer must withhold 15% of the gross sale price under FIRPTA and remit it on Forms 8288 and 8288-A. The IRS definition of foreign person is “a nonresident alien individual” (or foreign entity) — and the IRS states explicitly: “It does not include a resident alien individual.” If you live in the US and meet the substantial presence test, you are a resident alien, FIRPTA does not apply to your sale, and you can certify your non-foreign status to the buyer. Some title companies see an ITIN and assume foreign status — that assumption is wrong. Having an ITIN instead of an SSN does not make you a foreign person; your residency status does. You still owe regular capital-gains tax on the sale, reported on Schedule D — see the full walkthrough in selling your home with an ITIN.

Last verified: 2026-06-11. Sources: IRS Topic 414 — rental income, IRS Publication 527, IRS — estimated taxes, IRS — FIRPTA withholding.

General information — not tax advice. For case-specific guidance, consult an Enrolled Agent or CPA with ITIN experience.