Re: Italy rental. I think you are wrong. Treaty Article 1(2)(b) says that no matter what the treaty says elsewhere (with a few exceptions) the US can tax its citizens on their worldwide income. So, while the treaty lets Italy tax your rental income, so can the US. So even if the Treaty says only Italy can tax the income because of the location of the property, 1(2)(b) says that doesn't matter. The US can also tax it.
23(2) is what prevents double taxation. It allows the IRC 904 foreign tax credit for US taxed income that is from "without the US."
Your Italian rental income is from without the US because of I.R.C. 862(4). This is true even without any treaty provision.
So you must pay whatever tax Italy requires and you must report the income on your 1040 (Schedule E). You might recover some or all of the Italian tax via the FTC on form 1116.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
