Do You Get US Tax Deductions for Real Estate Abroad?

If you own real estate outside of the United States, you may wonder if you can take advantage of US tax deductions. Here’s what you need to know.

Eligibility

As a US citizen or resident, you are required to report your worldwide income to the Internal Revenue Service (IRS) and pay taxes on it. This includes any rental income or capital gains from real estate located abroad.

Deductions

The good news is that you may be able to deduct expenses related to your foreign real estate from your US tax return. These expenses can include property taxes, mortgage interest, repairs, and maintenance costs.

Limitations

There are some limitations to the deductions you can claim for foreign real estate. For example, the IRS only allows you to deduct expenses that are “ordinary and necessary” for the production of rental income or the management of the property. Additionally, if you have rental income from foreign real estate, you may be subject to foreign taxes that cannot be deducted from your US tax return.

Reporting Requirements

If you have foreign real estate, you may also have reporting requirements with the IRS. You may need to file Form 8938, Statement of Specified Foreign Financial Assets, and/or Form 114, Report of Foreign Bank and Financial Accounts (FBAR).

Conclusion

If you own real estate outside of the United States, you may be able to take advantage of US tax deductions. Make sure you understand the limitations and reporting requirements and consult a tax professional if you need help.