Is mortgage interest on a foreign home loan deductible?

[rajarshim]

My primary home is in India on which I have a loan and pay interest. Is the interest deductible?

[bhirche]

How do you claim the deduction when the lender is not a US bank but a foreign bank?

[haaslandguy]

I have paid taxes for the past two years and not taken the deduction because I was not aware I could do this in a foreighn country...can I deduct both years this year?

[JonathanR · Accepted solution]

Hello rajarshim

Interestingly enough, the US tax code makes no substantive distinction between United States based real estate and real estate in a foreign country, when it comes to the question of being able to deduct mortgage interest or property taxes.  In point of fact, the rules for being able to deduct either are the same.

Therefore, in order to proceed mechanically in TurboTax, just make your entries in the deductions section as though the Indian home were your home in the United States.

Here is a well-written article on this exact topic that you may additionally find interesting:

http://www.taxsamaritan.com/tax-preparation/foreign-mortgage-interest-deduction/

This information was provided by TurboTaxGeoffreyG , TurboTax Employee; EA, MBA

Thank you for using Turbo Tax.

[rajarshim]

Hi Geoffrey, This was very helpful. I have a home in the US which is a rental property. I am already claiming interest on loan for it and relevant property tax as deductible. Can I deduct interest on my India home in addition to that? Thanks.

[eduardo-h-]

Geoffrey, Could you clarify on how make the entries in the deductions section as though the foreign home were in the United States?. My question is about the Address and the SSN for the lender. The Turbotax form does not accept foreign address(state), neither SSN#. So I keep receiving messages on to fix, but not able to to do it.

[GeoffreyG]

If your mortgage lender is foreign, but the interest is otherwise (legally) deductible, then in order to get around any blockage such as this in the TurboTax software, you can simply substitute a US address (such as your own, for example) and a "fictitious" EIN (Employer Identification Number) or SSN into the relevant data entry fields in the program.  For instance, 1234 Main Street, Anytown, USA, EIN # 93-1234567.  That will allow you to move beyond any data entry error screen issues.  Moreover, none of this mortgage lender information will be transmitted to the IRS, other than the amount, so it's really not too important what you input here.  Of course, please do save your actual foreign mortgage interest payment records, so that you'll be able to produce them for the government authorities, in the unlikely event of an IRS audit or examination.

[AnuragObulam]

Hey,

Just trying to figure out how you claimed deductions for the 2 years that you missed on your Mortgage Interest for your home in India. I'm in a similar situation and it would be helpful to understand what you did.

Thanks in advance!

[AbrahamT]

No, you cannot pickup the missed interest expense as a deduction for your home in Indiana this year. The only other option you would have is to amend the prior years returns to reflect those expenses. You would have to figure out how much of an additional savings on your prior years tax liabilty you would benefit by picking up the additional expenses. The time and costs of preparing these amended returns may not even be worth your while.