My wife & I started a school as a business in a foreign country with my personal income from the US. Can my foreign business expenses be deducted on my taxes? If so, how?

[DS30 · Accepted solution]

It depends -

You will be allowed to deduction any business expense (whether US or foreign) in USD that are considered both "ordinary" and "necessary"  related to your business income.

How you report these expenses will be determined on how you structured your foreign business.

If the foreign business is a not created as a separate entity from your (like a foreign corporation or foreign partnership, then you will report all foreign sourced income and expenses on a Schedule C attached to your personal tax return (as self-employment income).

If you set up a foreign corporation or partnership, you would not report the foreign business expense on your personal income tax return but may have other types of files that you would need to include with your personal tax return (mainly Form 5471 for a controlled foreign corporation or Form 8865 for a foreign controlled partnership).