Can TurboTax Premier handle foreign rental income(Schedule E + 1116)? If property is held by a U.S. company, what forms apply? If foreign company, need CPA for 5471/FBAR?

[wheresjonny]

Looking at buying a rental property abroad. Attorney suggested using a U.S. entity to hold title for simplicity. I’m trying to understand how TurboTax handles foreign rental income (Schedule E + 1116) and whether additional forms apply depending on structure (e.g., U.S. entity vs foreign entity). Not looking for tax advice, just whether TurboTax supports this or if it would push me to a CPA.

[pk]

@wheresjonny  using the simplest manifestation of the scenario  i.e. an US person ( citizen/GreenCard/Resident for tax purposes ) owning a foreign residential property, used as income property, having foreign bank account(s) and having  US tax-home,  YES,  TurboTax of appropriate level  ( I use  windows  Home & Business  and partial to it ) can indeed do an excellent job of  helping prepare a correct return ( both federal and State).

There is very little difference between  a Schedule-E for a domestic prop. vs. a foreign prop.

Form 1116 is supported by TurboTax adequately.

Filing of FBAR is  done directly at FinCen.gov ( form 114 and ONLY on-line  ).  

FATCA  ( form 8938 ) is filed along with your return and supported by TurboTax

Note that rental income recognition for US purposes is per US tax laws only and , based on the tax regime at the host country, may or may not result in the same foreign source income and/or  FTC.

Have zero opinion on whether the  holding of the foreign income prop. should be through an entity ( domestic or foreign ) or individual.

Also please consider familiarization with US-that country tax treaty.

Is there more i can do for you 

[wheresjonny]

I appreciate your insight, thank you. I looked at “TurboTax Home & Business + TurboTax Advantage” and its ‘benefits’ section, similar to what you have, I think.

Can TurboTax Premier fully support a U.S. single-member LLC (which you disregarded), or other US entity, that owns a Colombian rental — i.e. prepare Schedule E with depreciation, Form 1116 (foreign tax credit) and Form 8938 entries (if needed)?

Also: does TurboTax provide any FBAR (FinCEN 114) filing help/guidance, or must that be done separately at FinCEN.gov?

Finally, confirm TurboTax does not handle complex foreign-entity filings (e.g., Form 5471) — I’ll hire a CPA for those. Thanks. @pk 

[pk]

@wheresjonny  thankyou for your response. 

1.  As I said earlier FBAR form is simply a notification i.e. an information form --- US Treasury under its agreements  with foreign financial institutions already has most of the information and  a US person's  filing form 114 just  confirms and/or closes any missing information .  While filing is voluntary and not a tax event,  willful ignoring ( i.e. not filing when eligibility is met ) can attract onerous  penalties.

2.  US LLC protection is not applicable in cases of foreign claims i.e.  an llc owner is not protected/ limited-liability  is not valid in case of claims by a foreign person in a foreign jurisdiction. The dis-regarding ( of  entity ) is only for US tax purposes.

3. I do not understand your reference to form 5471.  Nor do I understand  the need/ advantage of owning a foreign entity just to own/operate  a single  income property. However, I do agree  that if this income stream ( i.e. owning / operating rental/income properties and multiple of these )  is large and/or complex  enough then a local entity is probably the best way forward.  Even in such a case , however, for single member LLC (  organized under the laws of resident state ) may be an overkill.  I am a strong believer in KISS ( Keep It Simple Stupid ) principle -- there are less things to go wrong.

4. Schedule-E support includes  asset depreciation.  Form 1116  is definitely supported  in H&B.   TurboTax Advantage ( I think ) is only a program to automatically  renew subscription/purchase of  selected product at the end of each year --- you don't have to take any steps to order the new  product each year.

5. As I understand the  TurboTax desktop products  -- each  supports all the required forms but the  "step-by-step" interview is graded i.e. more  items are supported as one goes up the product line-up.   The  Home & Business  covers  from the simplest to the most complex.  

6. The  TurboTax Business product   ( not H & B ), supports  entity (  partnerships, S-Corp, C-Corp etc. ) filings ONLY.

Is there more I can do for you ?

[Mike9241]

Most likely, the attorney is suggesting a domestic LLC. To be sure, ask. A single-member LLC does not file a Federal income tax return. It is a disregarded entity and you would reprot directly on 1040 Schedule E. States , if your state has a personal income tax, usually don't require filing a separate income tax return. However, some states impose a minimum LLC fee. Depreciation is 30 years for foreign residential real estate rather than 27.5, for domestic. For US Income tax reporting, you would need to convert from foreign currency to US currency.  The conversion would be a DIY project. Otherwise, TurboTax should have no issues handling the foreign property.

The FTC, by category, is limited to the US tax multiplied by the ratio of foreign taxable income to total taxable income. A loss results in a carryforward. In some cases, the effective Foreign tax rate is more than the effective US tax rate, resulting in the excess foreign taxes being carried over. The law specifies a 1-year carryback, if possible, and a 10-year carryforward after which the carryforward is permanently lost.