topic Can I apply Foreign Tax Credit to Property Tax? in Deductions & credits

Can I apply Foreign Tax Credit to Property Tax?

gzip — Sat, 01 Jun 2019 00:33:08 GMT

In 2015, I paid a substantial amount of property tax in Italy.
  This are not for my primary home
  I understand this is deductible under Property Tax under Other Property.
  Is it possible, however, to apply foreign tax credit to it?
  If so, is it preferable (greater reduction of total tax liability)?

No you cannot claim the foreign real estate tax paid for...

jtax — Sat, 01 Jun 2019 00:33:10 GMT

No you cannot claim the foreign real estate tax paid for purposes of the foreign tax credit. For the credit the tax must be an income tax (or tax in lieu of an an income tax).

See "What Foreign Taxes Qualify for the Credit" https://www.irs.gov/publications/p514/ar02.html#en_US_2015_publink1000224404

You are correct that you may deduct the foreign real estate property taxes if you meet the other usual requirements (e.g. ownership). See 26 U.S.C. 164(a)(1) "State and local, and foreign, real property taxes." (Note that 164(a)(2) does not say foreign so foreign personal property taxes (e.g. cars, boats, etc.) are not deductible.

26 U.S. Code § 164 - Taxes | US Law | LII / Legal Information Institute

Thank you for your reply. The foreign real estate taxes p...

mich_chan — Sat, 01 Jun 2019 00:33:11 GMT

Thank you for your reply. The foreign real estate taxes paid for taxes on a rental property that generated passive. Can I please confirm with you that I can claim foreign tax credit on it?

I don't know. It doesn't seem to be a tax on income but r...

jtax — Sat, 01 Jun 2019 00:33:13 GMT

I don't know. It doesn't seem to be a tax on income but rather a tax on property. The former is eligible for the foreign tax credit, the later isn't. See IRC 904(b)(1): US citizens foreign tax credit only allowed for "income, war profits, and excess profits taxes" ... it does not say property taxes. This is probably an area you should seek professional guidance from a tax attorney, CPA, or enrolled agent to be sure.