Where do I report income from a rental property I own in Europe?

[Coleen3 · Accepted solution]

You would still report it on Schedule E in the Rental section of Premier Edition. 

There is no difference for US tax reporting if the property is in the US or abroad. You will calculate your net rental income on schedule E.

Report this income under Rental Property, and be sure to indicate the location is in a Foreign Country (See the attached screenshot below. Click to enlarge.)

Go into your TurboTax return. Not sure you're in there? Click on the orange Take me to my return button.

1.       Search for rentals and then click the "Jump to" link in the search result.

2.       Answer Yes to the question Did you have any rental or royalty income and expenses?

3.       Follow the on-screen instructions as you proceed through the rental and royalties section.

o    We'll first ask you to enter general information about your rental (description, address, ownership percentage, etc.) 

o    Eventually, you'll come to the Rental Summary screen which is where you enter your:

·         Rental income

·         Rental expenses

·         Capital assets and depreciation

·         Vehicle expenses

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

If you paid Foreign Income Tax on the profit from your rental, you may qualify for a Foreign Tax Credit or a deduction. Follow these steps to see enter information about the foreign income tax you paid in TurboTax:

• Open (continue) working on your return in TurboTax.
• Enter the your foreign rental income and expenses.
• If you have any other foreign income, enter it before continuing.
• Search for foreign tax credit, then click the "Jump to" link in the search results.
• Click Continue and carefully follow the onscreen instructions. Note that rental income is considered Passive Income.
• In most cases, taking the credit works out better than the deduction. TurboTax will help you decide which one is best for you when you go through the foreign tax screens.

[jppwalsh]

Should Foreign Tax paid on Rental Income be entered on Schedule E as an expense and if Yes where? Or should it only be entered on Form 1116 to claim the Tax Credit.

[SusanY1]

Foreign taxes paid on the rental income should be entered separately under foreign taxes paid in the deductions and credits section of TurboTax to be applied as a foreign tax credit (Form 1116) against your net rental income or other similar foreign passive income.  

Foreign taxes paid on the land or building would be entered as an expense on the Schedule E (Rental Income/Expense) section of the program.  

@jppwalsh

[rmoore17]

There is no mention as to reporting this rental activity in US $$.   I assume that is the procedure?

[AnnetteB6]

Yes, you would need to report all income and expenses in US dollars since you are completing a US tax return.

@rmoore17