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  • Welcome to Lofty's FAQ đź‘‹
  • FAQ
    • What is Lofty?
    • How does the Lofty Marketplace work?
    • Which payment methods can tokens be purchased with?
    • Can non-US citizens participate?
    • Can I sell my tokens anytime?
    • How does Lofty make money?
    • How do taxes work?
    • How does governance work?
    • How are repairs handled?
    • How often do I receive rental income?
    • How do I withdraw my rental income?
    • Do I benefit from depreciation?
    • Will I lose my tokens if Lofty AI goes out of business?
    • As an owner am I liable if any lawsuits / accidents occur at the property?
    • Who manages the properties?
    • What is your Property Manager's process and tenant selection criteria?
    • Are Lofty properties purchased using debt?
    • Who owns the properties that are being listed on your platform?
    • How long after I pay will I receive tokens in my Algorand wallet?
    • Does the price of Algorand affect the price of Lofty tokens?
    • What is an Algorand wallet’? Why do I need one?
    • Which blockchain is Lofty AI using to tokenize properties?
    • How many tokens can I purchase in each property?
    • Can I do a 1031 Exchange with Lofty properties?
    • Who legally has ownership of these properties?
    • How is token appreciation determined over time?
    • How do we ensure each LLC owns the deed on its property?
    • Do I have to submit my ID before I can participate?
    • Why do I need to fill in personal information, and is it encrypted?
    • Why is my ID verification taking so long?
    • How can I track the performance of my property?
    • How long are properties held before they're sold?
    • Do you have 2 Factor Authentication (2FA) available?
    • What happens if a property doesn't sell fully by the deadline on the website?
  • Glossary
    • IRR
    • Cash on Cash return (CoC)
    • Cap rate
    • Appreciation
    • Net Operating Income (NOI)
    • Diversification
    • Operating Expenses
    • CapEx
    • Single-Family
    • Duplex
    • Triplex
    • Quadplex/Fourplex
    • Capital Gains Tax
    • Closing costs
    • MLS
    • HVAC
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  1. FAQ

How do taxes work?

US Residents:

You are required to disclose any income you receive from Lofty to the IRS.

Taxes are filed using a K1 form that we fill out for you and send to the IRS. You will also receive a filled out copy. Rental income is taxed as normal income and standard capital gains taxes apply once you sell your tokens for a gain.

You will receive a separate K1 form per property you invest in. The K1 forms are pre-filled and you will only have to fill in a few fields in your Form-1040, which is your personal income tax filing.

You will also be responsible for filing state taxes in the states that properties are located in. Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming don't have state income taxes, so in these states, you do not have to worry about filing state income tax. If your rental income does not exceed $1,000 USD for the tax year from a property investment in a different state, some CPAs would recommend you not file taxes in those foreign states. However, you should always consult your own accountant and make decisions based on your own risk tolerance.

Non-US Residents:

If you are located outside the US, you will be subjected to withholding taxes when you try to sell your tokens for a gain or withdraw your rental income. Some countries have Tax treaties with the USA, so if your country has one and you don’t want to pay withholding taxes, you will need to complete a Form W-8BEN, for individuals, and Form W-8BEN-E, if you invested as a business entity, and send it to documents@lofty.ai, as separate attachments in the email, before you withdraw rental income or decide to sell your tokens. This process is only available for foreign entities or individuals who have a SSN or ITIN within the USA. If you do not possess one of these numbers, you will have to be subjected to foreign withholding taxes.

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Last updated 3 years ago