How to handle foreign property rental loss

[LXT]

Hi,

I have a property which is being rented out in Europe. After getting all the rental income and related costs into TurboTax, it turns out to be a loss of about $5000. At the same time, I'm paying tax for the rental income in the foreign country where the property is located. Is there any way to offset my loss in TT in the US? How can I get foreign credit for the tax I'm paying in the foreign country?

Thanks!

[MarilynG1 · Accepted solution]

You can enter Income/Expenses for your Foreign Rental Property in TurboTax the same way you would a US property.  If you have a Rental Loss, it can be used to offset other income on your return. 

The only difference you will encounter is the type of depreciation you are required to take when it is foreign property. It will need to be depreciated over 40 years instead of the normal 27.5

Claim a Deduction for Foreign Tax paid on your Foreign Rental Income in the Foreign Tax section under 'Deductions & Credits'.

Click this link for more info on Foreign Rental Income.

[LXT]

Thanks for the answer.

What I observed is that when my rental loss is updated to either higher or lower number, it didn't offset my total tax due. It doesn't seem to offset my US tax. Dose it have to be the passive income in US it can offset?

[ErnieS0]

No. The IRS has a special allowance for rental real estate activities. You can deduct up to $25,000 of rental losses against ordinary income. However, your loss begins to phase out at $100,000 ($50,000 married filing separately) and is suspended once your income reaches $150,000 ($75,000).

Suspended losses can be applied against other passive income or claimed in the year of sale.

See Special Allowance for Rental Real Estate Activities