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ungerhj
New Member

Foreign purchased and financed home no 1098

I'm trying to report mortgage interest from the purchase of a foreign home from a foreign bank and I did not get a 1098.  I followed the advise to input the lenders name, select continue and then select "I did not receive a 1098" and that option is not available.  How do I proceed to input the mortgage interest?  Thanks

1 Best answer

Accepted Solutions
AnnS7
New Member

Foreign purchased and financed home no 1098

Yes, you can take both qualified foreign mortgage interest paid and foreign real estate taxes paid as an itemized deduction on your tax return.  You may only deduct the amounts paid in the current year.  (You would have to amend prior year returns to take interest and real estate taxes paid in prior years.)

According to the IRS, qualified foreign mortgage interest is as follows:

  • Debt that is incurred to acquire, construct or substantially improve the taxpayer’s main or second home, and
  • Debt that is secured by the home

You  will need to determine the interest portion of your loan (for example through a statement received from your foreign bank or an amortization table).  Retain the documents you used for your records.

Deductible real estate taxes are generally any state, local, or foreign taxes on real property imposed by local government in a uniform manner. 

To enter your mortgage interest in TurboTax Online or Desktop, please follow these steps:

  • Once you are in your tax return, click on the Federal Taxes tab ("Personal" tab in TurboTax Home & Business)
  • Click on the Search link on upper right of the screen (look for small magnifying lens)
  • Type in Mortgage Interest
  • Click on Jump to Mortgage Interest (in blue)
  • Under "Mortgage Interest and Refinance" you will follow screens to Let's get the details from your Bank 1098 now
  • Enter the amount paid for mortgage interest in Box 1.  (TurboTax has no separate screen to enter mortgage interest not reported on a Form 1098).

To enter real estate taxes paid:

  • Once you are in your tax return, click on the Federal Taxes tab ("Personal" tab in TurboTax Home & Business)
  • Click on Federal Taxes tab
  • Choose Deductions and Credits tab
  • Click on Show more down arrow next to Your Home (in blue to the right)
  • Click on Start button to right of Property Taxes

You will only be allowed to take these deductions if you itemize using Schedule A on your tax return.  If you don't have any other itemized deductions, TurboTax will deduct the greater of the standard deduction or itemized deductions. TurboTax will choose the one that lowers your overall tax liability.

The deductions will be taken in USD . You must translate foreign currency into U.S. dollars if you receive income or pay expenses in a foreign currency. In general, use the exchange rate prevailing (i.e., the spot rate) when you receive, pay or accrue the item.  Otherwise, you can choose to use the IRS' Yearly Average Currency Exchange Rates.

View solution in original post

3 Replies
AnnS7
New Member

Foreign purchased and financed home no 1098

Yes, you can take both qualified foreign mortgage interest paid and foreign real estate taxes paid as an itemized deduction on your tax return.  You may only deduct the amounts paid in the current year.  (You would have to amend prior year returns to take interest and real estate taxes paid in prior years.)

According to the IRS, qualified foreign mortgage interest is as follows:

  • Debt that is incurred to acquire, construct or substantially improve the taxpayer’s main or second home, and
  • Debt that is secured by the home

You  will need to determine the interest portion of your loan (for example through a statement received from your foreign bank or an amortization table).  Retain the documents you used for your records.

Deductible real estate taxes are generally any state, local, or foreign taxes on real property imposed by local government in a uniform manner. 

To enter your mortgage interest in TurboTax Online or Desktop, please follow these steps:

  • Once you are in your tax return, click on the Federal Taxes tab ("Personal" tab in TurboTax Home & Business)
  • Click on the Search link on upper right of the screen (look for small magnifying lens)
  • Type in Mortgage Interest
  • Click on Jump to Mortgage Interest (in blue)
  • Under "Mortgage Interest and Refinance" you will follow screens to Let's get the details from your Bank 1098 now
  • Enter the amount paid for mortgage interest in Box 1.  (TurboTax has no separate screen to enter mortgage interest not reported on a Form 1098).

To enter real estate taxes paid:

  • Once you are in your tax return, click on the Federal Taxes tab ("Personal" tab in TurboTax Home & Business)
  • Click on Federal Taxes tab
  • Choose Deductions and Credits tab
  • Click on Show more down arrow next to Your Home (in blue to the right)
  • Click on Start button to right of Property Taxes

You will only be allowed to take these deductions if you itemize using Schedule A on your tax return.  If you don't have any other itemized deductions, TurboTax will deduct the greater of the standard deduction or itemized deductions. TurboTax will choose the one that lowers your overall tax liability.

The deductions will be taken in USD . You must translate foreign currency into U.S. dollars if you receive income or pay expenses in a foreign currency. In general, use the exchange rate prevailing (i.e., the spot rate) when you receive, pay or accrue the item.  Otherwise, you can choose to use the IRS' Yearly Average Currency Exchange Rates.

jvandeven
New Member

Foreign purchased and financed home no 1098

Hi, 

 

Thanks for this answer. So will the deduction from the foreign mortgage interest will be applied to one's overall annual tax liability, or will it just be to reduce the taxable rental income in case the second home is rented out? 

 

Thank you! 

Foreign purchased and financed home no 1098

If this is on a rental property then the deduction is reported on the Sch E and reduces the rental income received ... it is NOT a credit against tax liability. 

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