How do I report my foreign rental income? I am citizen of US. I have already declared this income In India. Where do I report this information?

[mm1232]

Questions I am asking in this thread not related to my tax return.

But it's a thing, which I am trying to understand how it works.

[mm1232]

@Carl
@AmeliesUncle

in addition to the reference, I mentioned before

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/i-have-rent-income-in-germany-wh...

I also found the same explanation here (published 3 years ago)
https://www.german-probate-lawyer.com/en/detail/article/taxation-us-citizensresidents-of-rental-inco...

And the same thing should work for India as India/Germany article 6 in tax treaty very similar.

So I assume, that things about deprecation and taxation on foreign rental income would work for countries, where no such exclusion under the tax treaty. And probably it should work in the same way for US citizens, GC holders, and other US resident aliens. So it's a kind of general approach on rental property taxation.

Unless a reporter voluntarily or due to lack of knowledge of such exclusion will decide to tax his foreign rental income under the general US approach. It's not wrong, he just could pay additional taxes and it could be a more complicated way as all expenses, etc should be reported.

It would be perfect if some tax professionals could confirm or provide a critic in this discussion.

to summarize my current understanding:
It seems to me that in addition to do foreign tax credit for specified income (which is a common and well-known way to do under form 1116) we have additional options to exclude very specific incomes @ all using tax treaties from taxation. For sure tax treaties should clearly define this option for a specific country and specific income (and it seems like not well-known but allowed way). And Form 8833 designed especially for that and should be attached to the tax return.

[AmeliesUncle]

As I said before, you always needs to start at the "saving clause".  That states what, if any, of the Treaty provisions apply to US Citizens and Residents.  In most cases, most provisions of the Treaty do NOT apply to US Citizens and Residents.  In the case of rental income from India, the Saving Clause says the Treaty would not apply to US Citizens and Residents.  Therefore the Treaty would NOT affect your tax return, and the only thing you would use is the Foreign Tax Credit (or if it is Wages or Self Employment, possibly the Foreign Earned Income Exclusion if that applies).

[goaniruddha]

Hi,

When you calculate the purchase cost and current value of your home in foreign country like India... what should be the currency rate we should use? Avg. currency rate of 2020 for valuae and avg currency rate when the property was purchased or avg rate of 2020 for both?

[mm1232]

I am not a specialist, so my opinion can't be considered as correct, but I would assume that property it's like shares. So it has purchase price (converted to functional currency - USD) by the exchange rate on the date of purchase.

https://www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates 

Also, make sense to read this article to check the correctness of all assumptions.

https://www.irs.gov/forms-pubs/about-publication-527 

[deshraj_rana]

I agree with you and even my understanding is same that the rules for property is same and it should not be double taxed in USA however it needs to be declared.  I even doubt that we should declare that income here in USA.

Also, how do we enter the tax details separately for income from house rental and income from the bank interest. India does not calculate taxes differently and also the fiscal tax calendar is different. too much confusion and TurboTax help is also not very good on this subject.

[MarilynG1]

@deshraj_rana Click this link for info on Reporting Foreign Rental Income.

Here's details on entering the Foreign Tax Credit for tax you paid on your passive rental income.