Foreign home purchase

[rj_nc]

We are purchasing a home in Portugal this year as a second home. We know that there will be more than 10K in our new, PT, bank account at some point during the transactions so realize that we will need to file an FBAR for this tax year. It is worth noting that the home will not be rented and therefore will not generate any foreign income for declaration or taxation by the foreign government.

What other information will we need to gather and have available for reporting for 2024? 

Does TurboTax help with this type of situation or will we need assistance from someone who has experience filing US taxes for a foreign, second home purchase.

[marctu · Accepted solution]

So the purchase of a home, be it in the US, or in a foreign country, does not create income, unless it is sold within the same tax year.   The interest, if you will have a mortgage on the property in Portugal, would be deductible if  if it meets all the usual tests. The loan must be an acquisition loan (one to purchase the home), and it must be secured by the home. The two home (main home and second home) limit applies in addition to the $1 million total debt limit. Interest on equity loans may also be deducted up to $100,000 of loan amount.

Of course, you must be able to itemize your deductions on Schedule A to take advantage of the mortgage interest deduction. Commonly the mortgage interest and property taxes alone are enough to propel you into exceeding the standard deduction and allowing an itemization of your deductions.

Lastly, the amounts must be converted to USD.   You can use the Yearly Average Currency Exchange Rates found here to do so.  

Turbo Tax can easily handle this situation.   Our experts are here to help you every step of the way.   

Thank you for the question @rj_nc Best of luck with the purchase!!

All the best,

Marc 

Employee Tax Expert

[rj_nc]

Thanks Marc! We are very excited about the opportunity to buy the property.

Yes we will be purchasing the home through a loan (PT bank) so the confirmation about deducting interest and property taxes are welcome news. 

Regarding TurboTax - is this situation something that is straight-forward or is this complex enough to warrant having a professional working directly with me on the taxes?

Thanks again for the excellent response!

[marctu]

So as to your follow up question @rj_nc at Turbo Tax we are here to help you every step of the way.   It really depends upon your comfort level.  Live Full Service is a choice where a tax expert who is matched to your unique situation will get you taxes done 100% right.  Or, get expert help as you go and a final review with Live Assisted.