You will enter your qualified foreign mortgage interest as if you had a Form 1098.
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, type "mortgage interest" into search box on blue dashboard
- Click
on Jump to Mortgage Interest
(in blue)
- On the "Mortgage deduction summary" screen, click Add a lender
- Enter lender information and on the "Let's get the details from your bank 1098 now" screen, enter
your foreign 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.
