Form 1116 for rental income of foreign property - do I list expenses and depreciation if I don't itemize

Forum|Forum|2 months ago
April 23, 2026
2 replies
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I have a rental property in a foreign country and generate USD 35k in gross rental income for the year. The expenses were 13k and the yearly depreciation was 15k. This means the net rental income was 7k (35k-13k-15k). The foreign country doesn't allow me to deduct depreciation and so for them the net income was 22k for which I paid 4k in taxes.

How do I fill form 1116 out to get the foreign tax credit? I enter the gross income of 35k on line 1a. On line 2 do I enter the expenses of 13k or do enter 28k (expenses and deprecation) or do I enter 0 since I am not itemizing and taking the standard deduction?

Mike9241

Level 15

What country, because there may be a tax treaty dealing with the reporting

Mike9241

chag2020Author

Level 4

Mexico and Switzerland

Vanessa A

Level 15

You would enter $28k for expenses on line 2. Your tax credit is based on the US taxable income from that source. So if the tax on that $7,000 would be $1,000 (throwing out a random number), you would only be able to claim $1,000 of the credit on this years return to offset the tax on that same income. However, the remaining $3,000 could then be carried back a year or carried forward up to 10 years.

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