topic 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? in Investors & landlords

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?

panmais — Fri, 31 May 2019 23:49:48 GMT

I am US citizen having rental property in India (foreign country). I get rental income and deposited directly in Indian bank I am not repatriating that money to the US. I have already declared this income in India. Where do I report this information when I file US tax return

I have already paid income taxes for this rental income i...

panmais — Fri, 31 May 2019 23:49:50 GMT

I have already paid income taxes for this rental income in India, This money gets deposited to savings bank in India (not repatriating this income to US) . Also file income tax in India because of dividend and rental income. If I report it here, Will I be paying taxes twice (US AND INDIA)?

If, the income is also subject to India, taxation, you ma...

view2 — Fri, 31 May 2019 23:49:51 GMT

If, the income is also subject to India, taxation, you may be entitled to a credit on your US taxes. You would complete Form 1116 to take this credit.

Foreign taxes can be reported under Deductions & Credit / Estimates & Other Taxes Paid / Foreign Taxes.

As a citizen or resident of the United States, all your w...

view2 — Fri, 31 May 2019 23:49:54 GMT

As a citizen or resident of the United States, all your worldwide income is subject to taxation. Therefore, it should be included in your return.

Complete the rental section (Schedule E) so that you will be able to claim all related expenses and depreciation , The property should be reported on Schedule E first and with the correct selection of answers the necessary forms are generally generate in Turbotax.

Property located outside the country, you're required to depreciate the cost over 40 years.

I have the same situation; i need to know if i spend more...

sidbabb — Fri, 31 May 2019 23:49:56 GMT

I have the same situation; i need to know if i spend more than $600 on my rental property as operating expense. Usually, rules says that you need to provide form 1099 to service provider, but what happens if the property is outside US?

As long as the foreign contractor is not a U.S. person an...

view2 — Fri, 31 May 2019 23:49:58 GMT

As long as the foreign contractor is not a U.S. person and the services are wholly performed outside the U.S., then no Form 1099 is required and no withholding is required.
It is generally easier to ask them to complete a Form W-8BEN. By signing Form W-8BEN, the foreign contractor is certifying that he or she is not a U.S. person.

Re: As a citizen or resident of the United States, all your w...

sumangandhe9 — Thu, 11 Jul 2019 19:54:44 GMT

In schedule E I see a line where we can enter travel expenses, could international travel expenses count?

I had to visit my country to make a deal with brokers for advertisements of my property.

Re: 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 — Sat, 30 May 2020 16:28:10 GMT

All comments confusing, to be honest.

Guys, I understand that income should be taxed worldwide,

but maybe we should discuss how it should be done properly?

Let's take a look at the tax treaty first: https://www.irs.gov/pub/irs-trty/india.pdf

And I checked at a treaty for a few countries in the original language.

And actually, it says that real estate should be ONLY taxed in the country, where this property located.

At least it looks valid for India, Germany, and +1 more country. Maybe for other countries, it looks different.

I agree that it should be somehow reported on the IRS tax return, but I have some doubts (reading tax treaty statement) that additional taxes should be paid.

Please correct me if I am wrong in understanding, but at least it's how I understand what I read in the official document in article 6.

Re: 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?

AmeliesUncle — Sat, 30 May 2020 19:36:29 GMT

@mm1232

Most provisions in a Tax Treaty don't apply to US Citizens, and usually not US Residents either. The first thing you always need to read is the "saving clause".

As was noted above, if you paid tax to the other country, you can use the Foreign Tax Credit.

Re: 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 — Sun, 31 May 2020 02:57:33 GMT

@AmeliesUncle

ok, so "saving clause"
https://www.irs.gov/businesses/tax-treaties-can-affect-your-income-tax
"Most tax treaties have a saving clause that preserves the right of each country to
tax its own citizens and treaty residents as if no tax treaty were in effect"
However, on other hands, I see in the tax treaty the next, Article 6:
"Income derived by a RESIDENT of a Contracting State .... may be taxed in that other State"
So I don't see the "saving clause" here. I see that taxation going on by country, where property located.

If you have some knowledge, could you explain how it works for
US citizens, resident aliens, GC holders in a particular example?

About tax credit - it's clear. It can be claimed on form 1116.

Re: 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?

Carl — Sun, 31 May 2020 16:13:58 GMT

As a U.S. Citizen, all of your worldwide income from all sources is reportable on your U.S. Tax Return. That does not mean it's taxable. But it is definitely reportable. Period. End of story.

The fact the property is not in the U.S. is irrelevant. However, when entering the property in the TurboTax program make *ABSOLUTELY * *CERTAIN* that you indicate it is foreign rental property physically located outside of the U.S.

If the property was placed in service after Dec 31, 2017 then foreign rental property is depreciated over 30 years. If the property was placed in service in 2017 or before, then it's depreciated over 40 years.

When working through the SCH E expenses section, you have one area for real estate taxes, and another area of other taxes. You will enter *ALL* taxes paid to *ANY* taxing authority anywhere on planet earth.

For any foreign taxes *of* *any* *type* paid to *any* *foreign* taxing authority, it *WILL* be included on the SCH E. But your "foreign tax credit" for those taxes paid to foreign taxing authorities will *NOT* be dealt with on SCH E.

You will deal with those foreign taxes paid ***OUTSIDE*** of the SCH E under the Deductions and Credits tab (when you get to that point in the program). Under that tab is a section for Estimates and Other Taxes Paid. A sub-section of that is specifically and explicitly for foreign taxes paid. That is where you will enter and claim your credit for those foreign taxes paid to *ANY* foreign taxing authority.

Re: 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 — Sun, 31 May 2020 17:30:34 GMT

@Carl thx for the detailed answer.

As I initially mentioned - no doubt that it should be reportable.

About years - I heard that non-residential foreign property deprecation time 40 years. And residential - yes, 30.

Here I have a few questions if you don't mind:

1) how the price estimation of foreign property should be done properly? It's good if the property purchased. Then the price for deprecation is obvious. But if the property was bought on the initial building stage. Then renovation was paid. So after building went into live + renovation expenses, the price jumped up for some value.
I know the simple option of such estimation - order paid appraiser service. These guys do their estimation like in case of selling property. But this document issued under foreign country law and valid for a limited time - like 1 month. And I don't know whether this document workable in the case of US taxation. As usually, such prices close by value to the market price for similar apartments in the same areas.

2) What about other cases, like resident aliens? I am just trying to understand where tax treaty losing effect in the scope of "taxation in a foreign country only".
I found here https://ttlc.intuit.com/community/tax-credits-deductions/discussion/i-have-rent-income-in-germany-which-i-filed-in-the-us-i-heard-i-should-have-filed-in-ger-and-here/00/598037
Another suggestion related to Germany. So before I met this discussion thread I thought that such property income for the US residents should be reported but not taxed in the US.

India and German tax treaties almost the same. Difference between these two threads - US citizens vs resident aliens.

Any thoughts? Thx a lot.

Re: 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?

Carl — Sun, 31 May 2020 19:37:07 GMT

1) There is no estimation of price. If audited, you have to be able to prove it. Depreciation is based on the ***LESSER*** of what you paid for the property, or it's FMV on the date it was placed in service. Generally speaking, what you paid for the property will practically always be the lower amount, since real estate tends to increase in value over time.

Your cost basis is:

What you paid for the property plus any property improvements that were done *BEFORE* the property was placed in service. I have found TurboTax does not correctly figure the structure to land values if you add your purchase price to the cost of any improvements done before placing the property in service. So it's best to just separate them out. Enter what you paid for the property and let the program figure the split between the cost of land and cost of the structure for you. Then enter your property improvements as a physically separate entry in the Assets/Depreciation section.

2) As I understand it, you are a U.S. Citizen. There are 196 countries on this planet and the U.S. has tax treaties with 132 of them. Even if I know what country you're dealing with here, I am not a tax lawyer and therefore not knowledgeable on the terms or any tax treaty. But I do know that you can account for and get a credit for foreign taxes paid. That credit may or may not be dollar for dollar either. However, you will ***NOT*** deal with that anywhere on, near, or around the SCH E section of the program at all, in any way, shape, form or fashion. You'll deal with it long, long after you've finished all of the income section of the program and get to the Deductions & Credits tab. So don't concern yourself with that at this time until *AFTER* you have entered *ALL* of your income from *ALL* sources worldwide and are working through the Deductions & Credits tab. Otherwise, you *WILL* *SCREW* *THINGS* *UP*. I guarantee it.

Re: 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 — Sun, 31 May 2020 19:54:25 GMT

@Carl
1) thx for the clarifications and sharing observations;
2) no, I am not a US citizen. However, I am interested in how taxation going on on a particular example with India/Germany property. Article 6 in tax treaties of those countries almost the same and statements there are clear. I even quoted it here. And what I am reading in tax treaties contradict to what I see in this thread. So I am trying to understand where the root cause of this difference.

And I am interested in whether any difference in taxation for US citizens and resident aliens regarding the foreign property.

So as for now, I see two options of taxation -

2.1) taxation foreign property as US property with all related calculations about deprecation, etc;

2.2) reporting like was mention by the link above. But by the link, it's related to US residents, not US citizens.

So I am still don't have a clear vision about it.

Re: 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?

Carl — Sun, 31 May 2020 19:58:55 GMT

If you are not a U.S. citizen or legally registered alien with a green card and a social security number, then you can't even use the TurboTax program at all to file a U.S. tax return, specifically *because* of tax treaties which no version of TTX can handle. You'd have to file the 1040NR return which the TTX program does not have or support. For that, you'll use the service at www.sprintax.com which has no association with TurboTax, other than being referred to that site if/when applicable.

Re: 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 — Sun, 31 May 2020 20:50:04 GMT

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.

Re: 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 — Mon, 01 Jun 2020 03:17:19 GMT

@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-which-i-filed-in-the-us-i-heard-i-should-have-filed-in-ger-and-here/00/598037

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-income-derived-from-real-property-located-in-germany-1971.html

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.

Re: 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?

AmeliesUncle — Mon, 01 Jun 2020 17:01:17 GMT

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).

Re: 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?

goaniruddha — Wed, 08 Jul 2020 23:30:45 GMT

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?

Re: 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 — Wed, 08 Jul 2020 23:39:16 GMT

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