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christianjurado1
Returning Member

If I am selling real estate in a foreign country, can I use the amount paid for the real estate tax on the capital gains as foreign tax credit in my US tax return?

 
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10 Replies
Tsntaxpro
New Member

If I am selling real estate in a foreign country, can I use the amount paid for the real estate tax on the capital gains as foreign tax credit in my US tax return?

It will not affect the capital gain, but you will be able to include the FTC on your return noting the passive gross income (cap gain) on Form1116. If you sell at a loss, the FTC will carry forward until you have future (passive) foreign income. 

christianjurado1
Returning Member

If I am selling real estate in a foreign country, can I use the amount paid for the real estate tax on the capital gains as foreign tax credit in my US tax return?

Thank you. Just to clarify, if I pay f.e. 30k Usd in foreign real estate tax, I can claim part of that money back via the form 1116 on my US Tax return (because Us capital gains rate is lower than that of the foreign country)?

Anonymous
Not applicable

If I am selling real estate in a foreign country, can I use the amount paid for the real estate tax on the capital gains as foreign tax credit in my US tax return?

no.  ftc is for foreign income taxes not other foreign taxes.   

christianjurado1
Returning Member

If I am selling real estate in a foreign country, can I use the amount paid for the real estate tax on the capital gains as foreign tax credit in my US tax return?

How do I avoid double taxation then? I am paying tax on capital gains from selling real estate property in that foreign country. At the same token, I ned to declare that sale in the US as well. Does not make sense to me. I thought I would only have to pay the difference between what is capital gains tax in the US vs. in that foreign country, hence the foreign tax credit for the higher rate to be paid in that foreign country. Not correct?

rjs
Level 15
Level 15

If I am selling real estate in a foreign country, can I use the amount paid for the real estate tax on the capital gains as foreign tax credit in my US tax return?

You are not making a clear distinction between income tax and real estate tax. Capital gain is income. The tax on the gain is income tax, not real estate tax. Real estate tax is tax on the value of property that you own, not on the gain from selling property. You can claim the foreign tax credit for tax on income, such as the gain from a sale. You cannot claim the foreign tax credit for real estate tax.

kiaws
New Member

If I am selling real estate in a foreign country, can I use the amount paid for the real estate tax on the capital gains as foreign tax credit in my US tax return?

Thanks for the clarification of income tax vs. real estate tax.

A slightly different question on foreign property investment (real estate) gains and stock long term capital loss.
Can the stock loss say $10,000 offset the foreign property investment (real estate) gains?

If I am selling real estate in a foreign country, can I use the amount paid for the real estate tax on the capital gains as foreign tax credit in my US tax return?

All gains and losses reported on a Sch D  will net against each other automatically.  

christianjurado1
Returning Member

If I am selling real estate in a foreign country, can I use the amount paid for the real estate tax on the capital gains as foreign tax credit in my US tax return?

There is no corresponding US tax on the sale of the foreign real estate.  The foreign tax credit (and its corresponding capital gains tax in that foreign country) is just shown on form 1116. There is no US tax paid on the same asset to offset against, since it was directly paid at the source in that foreign country. The foreign property sale is not shown on schedule D, just on form 1116, is that correct?

DavidS127
Expert Alumni

If I am selling real estate in a foreign country, can I use the amount paid for the real estate tax on the capital gains as foreign tax credit in my US tax return?

If you are a U.S. citizen or resident alien filing Form 1040, your worldwide income is subject to U.S. income tax, regardless of where you reside or where the income occurred.  As a result, the gain from the sale of your real estate in a foreign country should be reported on your Form 1040.   Form 1116 is used to claim a Foreign Tax Credit related to the sale of the real estate.

 

See the IRS website at this link for information on reporting the gain on the sale of your foreign r....

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christianjurado1
Returning Member

If I am selling real estate in a foreign country, can I use the amount paid for the real estate tax on the capital gains as foreign tax credit in my US tax return?

Thank you. You mentioned if I sell at a loss, the FTC will carry over. In case of a gain, what about claiming the FTC not when when the gain actually occurred, but in later years? 

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