How do I report foreign property to the IRS?

[timkug]

I thought it was Form 8938, but doesn't seem to be so.

[LeonardS]

Can you please clarify what you mean by foreign property?

[timkug]

A house in another country.

[LeonardS · Accepted solution]

You do not have to report your foreign property on your tax return.

Foreign real estate is not a specified foreign financial asset required to be reported on Form 8938.  For example, a personal residence or a rental property does not have to be reported. Ref: IRS Foreign Financial Assets

However, if you are renting the foreign property you must report foreign rental activity on your U.S. tax return just like you would report any owned U.S. property.

To enter your rental:

1. Open or continue your return, if you haven’t already
2. Locate the Search bar in the upper right of your screen. Search for rentals and select the Jump to link at the top of the search results
3. Answer Yes to the question Did you have any income from rentals or royalties?
4. On the next screen, What are you here to report?, select Rentals and Continue
5. Follow the screen prompts to enter your rental information.

This TurboTax link Where do I enter income and expenses from a rental property? has information you may find useful.

[someone191]

So if I have property over 150,000 USD in my name in a foreign country, I don't have to report it anywhere?

[timkug]

No, ...unless you reported it as a home office or rented it out.

[Critter-3 · Accepted solution]

Only INCOME is reported on a US INCOME Tax return  so  unless this  is an  INCOME producing property like a rental or for business use nothing about it will be reported on the form 1040. 

[pk]

@timkug , agreeing with my colleague @Critter-3 ,  just wanted to add that 

(a) you need to keep record of your Acquistion cost

(b) depreciation in case you are renting out and reporting on Schedule-E

( c) cost of any improvements.

You will pay taxes on the gain when you dispose off the property.

Note all reportable figures in US$ at the time of transaction.

Does this help ?

[someone191]

Thanks, but does it need to be reported anywhere else to Uncle Sam? not just 1040?

[timkug]

You don't need to report it to the U.S. at all.  When you sell it, you don't need to report the gains to the U.S. if they were under $100k.

Here is some more info for you:

FBAR (Foreign Bank Account Report)
If you have over $10,000 in foreign financial accounts at any time during the year, you must file an FBAR. While there’s no tax liability involved, there are steep penalties for not filing.
Filing an FBAR means filing FinCEN Form 114 online:
https://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html

FATCA (Foreign Account Tax Compliance Act) Form 8938
Expats with a total value of foreign assets (excluding real estate) exceeding $400,000 also have to report them on IRS Form 8938 with your tax return.
https://www.goldinglawyers.com/form-8938-real-estate-irs-basics-of-foreign-real-estate-reporting/
https://www.irs.gov/businesses/corporations/fatca-information-for-individuals

When selling foreign property, only need to tell the IRS if capital gains are over $100k. If they are, fill out Form 3520. If the foreign property was your personal residence, you may be eligible for exclusion of your gain on your US tax return if you meet the 2 years out of 5 test for residing in the home.

[pk]

@someone191 , I  generally agree with all that @timkug  has said except for the last paragraph -----  you will be taxed on all gain when you dispose off  the inherited real estate.  The $100,000 reporting  on form 3520 is for receiving gifts and/or inheritances/bequeathals equal /or  greater than 100,000.  It has nothing to do  with proceeds of sale of inherited real estate.

Does that make sense ?  Is there more one of us can do for you ?

pk

[JAS1705]

My question is specifically for MLTs (mexican land trusts or fideicomisos) for  individual home ownership via a fideicomiso I assume that there is no reporting requirement other than a) 1040 income if you rent it and b) capital gains when it is sold.  So no IRS Form 8938 and no IRS Form 3520 - correct?

As per this link https://www.kahntaxlaw.com/irs-grants-limited-relief-u-s-persons-owning-mexican-property-fideicomiso... 

In June 2013, the IRS handed down Rev. Rul. 2013-14 which states that Mexican Land Trusts (MLTs), also known as “fideicomisos”, are not trusts for purposes of IRS tax law.  Prior to the ruling, there was confusion over whether these MLTs were trusts subject to onerous tax reporting requirements involving foreign trusts.  As a result of the ruling, those who hold MLTs, which include many individuals who own vacation or retirement homes in Mexico, are not required to comply with burdensome tax reporting requirements typically applicable to foreign trusts.

More info can also be found here: https://www.parkertaxpublishing.com/public/IRS_Rules_Mexican_Land_Trusts_Are_Not_Foreign_Trusts.html

[SusanY1]

Correct, you do not have to report a Mexican Land Trust as a trust on Form 3520.  You would only report it on that form if you inherited it or it was gifted to you (and then, only in the year inherited/received). 

Form 8938 is only for financial assets such as bank and brokerage accounts, and certain other financial assets such as some types of life insurance or pension plans.  So you are correct there as well, that form is not required for your foreign real property ownership. 

As others have indicated, you would report any income that is generated from the property (such as if you rent it out or when it is sold) but otherwise, there is no reporting requirement on 3520 or 8938.

[pk]

@JAS1705 , having read through your post / references and my colleague @SusanY1 's  response ( which I agree with ), I want to be sure that we are talking here about:

(a)  ownership of  immovable property in  Mexico  by non-citizens through the Fideicommiso instrumentality  is outside  the FATCA regs  ( form 8938 )

(b)  And that requirements for form 3520 in recognizing  gifts/inheritance  of Mexican  immovable property  from a US person  ( a signatory of a Fideicommiso ) does not come into effect  ( foreign property/asset from a US person to another US person).

Is there more one of us can do for you ?

[JAS1705]

I'm good many tanks, yes it was a property I bought last year.  Just had a bit of a panic on potential requirements to report it in my U.S. taxes.