I live in US and bought an apartment in India. I file taxes both in India and US. Can I claim tax deduction on mortgage interest for a home loan in both the countries?

[sgd]

I bought an apartment in India last year, it's still under construction and I have a home loan going there.  I live in US but I pay taxes and file returns both in US and India.  The question is, can I claim tax deduction for mortgage interest both in India and US?  One CPA I talked to said there is no rule saying this is invalid, so I want to get a second opinion.  Can you provide your opinion? Thanks.

[GeoffreyG]

From the perspective of United States income tax law, I would absolutely agree with the opinion given by the other CPA with whom you spoke.  A taxpayer filing a US tax return can claim mortgage interest and property taxes as itemized deductions on their first or second home, regardless of the country in which that home is located.

Thus, in theory, a US taxpayer could own a home in Washington, D.C., and another home in Dehli, India, and then deduct the property taxes and mortgage interest paid on both homes on their US income tax return.  The tax code of the United States permits this.

However, with respect to the Indian tax code, I do not know the answer to that, and could not say.  For your own protection, and to ensure that you remain in compliance with Indian tax law, you would be well-advised to check on this matter with either the Indian Ministry Of Finance / Department of Revenue, or an Indian tax professional, such as perhaps a Charted Accountant in India, or a tax lawyer based in India.

But, again, there is no problem with this from the perspective of the US.

Thank you for asking this important question.

[sgd]

Thank you for the reply.  One thing is still not clear to me - is there anything in the double taxation treaty between two countries that says anything about claiming deduction in both the countries on the same item?

[GeoffreyG]

Hello sgd:

Thank you for your follow-up question.  My answer is that there is nothing that I am aware of on the United States side of the equation that would otherwise restrict the deductions that you ask about.  US Code Title 26 (i.e., the federal tax laws of the United States) allows mortgage interest and property tax deductions for overseas homes of US taxpayers.

Moreover, there appears to be supporting language for this position in the 1991 treaty document itself.  Please see the following:

<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-trty/india.pdf">https://www.irs.gov/pub/irs-trty/india.pdf</a>

Article 1, Paragraph 2:

"The Convention shall not restrict in any manner any exclusion, exemption, deduction, credit, or other allowance now or here after accorded:

(a) by the laws of either Contracting State; or
(b) by any other agreement between the Contracting States"

I would certainly read that to mean that a valid tax deduction, under existing US tax law (such as for mortgage interest and property taxes) is not affected by the India - US Treaty.

Once again, however, although I am a licensed CPA with many years of experience in this area, I do not have the necessary expertise to express an authoritative opinion about these same tax deductions under Indian law; and for that reason I would respectfully suggest consulting with an Indian tax expert as well to arrive at the "other half" of this answer.

Thanks!

[dinky_123]

Hi

I have purchased a house in India on loan and its my first house property ever (its not rented and my parents live there) and I am currently living in Rental house in USA. I am on H1b Visa.

Can I claim mortgage interest deduction on my Indian house?

can I claim Foreign property taxes ie GST paid in India in USA return?

Thanks in advance

[RobertG]

A taxpayer can take an itemized deduction for so-called “qualified residence interest”.  Generally, this is interest paid on a mortgage secured by what the tax law calls a “qualified residence”.

A “qualified residence” is a principal residence (e.g., the taxpayer’s primary home) and one other residence owned and used by the taxpayer as a residence (vacation home or home used by a family member). These rules remain the same under the new law, and it does not matter whether the residence is located in the United States or overseas.

@dinky_123

[dinky_123]

Thanks Robert G

Appreciate it

[nsoni7]

Hi @RobertG 
I have a related question on deducting home loan interest for the home owned in India.
I am on H1B visa, working in US and plan to take home loan in India for the home owned by me and my brother.
If the home is jointly owned by both of us and also the home loan is sanctioned under our both names, but if I alone pay the entire (100%) of interest on the loan amount, can I alone claim (100%) of the interest payment towards my US tax deductions?

Thanks!

[Opus 17]

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@nsoni7 wrote:

Hi @RobertG 
I have a related question on deducting home loan interest for the home owned in India.
I am on H1B visa, working in US and plan to take home loan in India for the home owned by me and my brother.
If the home is jointly owned by both of us and also the home loan is sanctioned under our both names, but if I alone pay the entire (100%) of interest on the loan amount, can I alone claim (100%) of the interest payment towards my US tax deductions?

Thanks!

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For US tax law, you must be (a) an owner of the home and (b) a legally obligated borrower.  Further, the loan must (c) be secured by the property so that you can be foreclosed if you stop making payments.  (You can't deduct a loan as a mortgage if it is a personal loan or credit card loan that is not secured by the property.)

If you meet those requirements, then you can deduct the amount of interest that you actually paid.  If you pay all the mortgage, you can deduct all the interest. 

[md_94]

Hello,

I have a related question on deducting home loan interest for the home owned in India.
I am on F1 OPT visa, working in US and plan to take home loan in India for the home owned by me and my brother.
If the home is jointly owned by both of us and also the home loan is sanctioned under our both names, but if I alone pay the entire (100%) of interest on the loan amount, can I alone claim (100%) of the interest payment towards my US tax deductions?

Also, which section of 1040NR form can I claim this deduction?

Thanks!

[ReneeM7122]

Yes, if you are the person making the interest payments then you are entitled to any U.S. tax deductions.  It does not matter whose name is on on the deed or the mortgage.  

For form 1040NR, you will need to use Sprintax, as TurboTax does not support this form.

@md_94