Deducting UK Council Tax on Schedule A as a foreign real estate tax

[cabecabe]

Can I deduct Council Tax - a UK tax based on real estate value, generally payable by occupants but due from owners if a property is unoccupied - as a foreign real estate tax on Schedule A for a UK property I own? 

My starting argument would be that I can deduct 50% because that's the pure property tax amount - the tax that would be due even if the property was empty. But I would like to deduct it all. 

[pk · Accepted solution]

Assuming that you are a US citizen/resident, owning a property in the UK as a "second / vacation home", you should be able to deduct on Schedule-A the  property tax ( or equivalent ). If however, you choose to use it as an income property, then the property tax etc. would be declared on Schedule -E., as an expense against the ( at least fair market value ) rental income. If you have any mortgage interest payments on the subject property, it will be treated exaactly the same way.

If you are not a resident ( at least for tax purposes ), then there are other items to consider.

[cabecabe]

Thanks PK. I appreciate it!

[jarobertson93]

I am encountering a similar question as I've moved to the UK for a PhD program and though I am renting an apartment here, I am now liable to pay an extra $1500 annually in Council Tax (that is property tax). I would like to somehow apply this liability to my US taxes. Is this possible as I am a renter and this is UK apartment is now my primary residence for the duration of my schooling?

Thank you!

[DaveF1006]

No, you will not be able to exclude "council tax" as an itemized deduction because you do not own the property. However you may be able to claim the foreign income exclusion, you may be able this council tax as a foreign housing exclusion as an expense to maintain your foreign housing. Please click on those links for additional details to see if you qualify.

[pk]

@jarobertson93 , like to clarify some thing from the above reply ---- as I understand your situation:

(a) you are a student ( possibly with scholarship / grant etc ) in the UK

(b) you a US person ( citizen/ Green Card holder)

(c) you rent a place, use it as your main residence (? ) and are subject to council tax ( in addition to rent) 

(d) your question now is if there is a way to deduct this "tax" ( used to be called pole tax in Thatcher's time ) on your US tax filings.

We have no data  on your income in the UK but assuming that  scholarship / grant is the totality of it ,  then when you fill out US return , you file as student i.e. you get to deduct  your education fees and expenses from you income --- the only income that is then taxable to US is your living expenses. 

Generally you can indeed  exclude  some income under Foreign Earned Income exclusion ( but I doubt it would be worth while because  your grant exclusive of educational fees and expenses is not likely to be above  your  standard deduction.   Also note that  the above comment on "Housing Expense " is at odds with my understanding of the law ( and I have been expat for many many years ) --- generally your Foreign Earned Income ( eligible for exclusion ) includes actual wages, housing assistance from the employer as an expat, COLA because of higher cost in the UK compared to Washington DC , etc.  and thus this is not an extra amount beyond the maximum  allowable  foreign earnings exclusion amount =--- even though I doubt this is applicable to any student.

Bottom line of all this is that, while you cannot   deduct the council tax ( which is not on income), you may not even need to  itemize, --- if I am wrong on my assumptions of the situation, please  give me some details of your  income from UK sources, from US sources - we are after world income in addition to the UK only income, your educational expenses  etc. --- I am ready to work through the scenario and see what is the best possible path for you -- please no Personally Identifiable  Information -- this is open to public.

pk

[jarobertson93]

Thank you for your thorough response!

So, some specifics about my situation are as follows:

1. I am a US citizen

2. My only residence is now here in Oxford, UK (but if I need a US address for something I use my parents' in Illinois)

3. I began my program in Sept 2021, and prior to that I was living in New York and working as a self-employed actor, language tutor, and research assistant (I have always filed self-employed for taxes). My income for this previous year (2021) from self-employment is approximately $25k. In 2022 tax year, I will be a student full-time the entire year and will have limited to no additional income.

4. My UK program is a 3 year full-time PhD course, and I have a full scholarship that covers all my program tuition fees as well as providing a living expense stipend of approx. $21k annually. This tax year however I have not received any of the stipend, so my payments for that will begin in the 2022 tax year. 

5. One additional note: in order to secure a student visa to begin my program, I paid roughly $4,000 in addition to many thousands in travel and moving expenses for school. I would like to see if that can be deducted somehow. 

Happy to provide any more info, thank you so much!