You would have to report the income and expense on the Schedule E for rental property. You do this under the Rental Income and Expense section under income.
When you enter the cost basis and other expenses, you translate them into US dollars by exact date or average. For example, you would use the exact date for the purchase price, For equal expenses paid monthly, you could average month-end translation rates and apply that rate to the amount paid over the year.
For depreciation purposes, you will enter the rental property as an Asset, and make sure you choose that this is a foreign property, as foreign properties depreciate at a different rate than domestic properties. The program will then calculate the allowable depreciation for you.
You can only deduct foreign tax paid up to the amount of tax you WOULD have paid in the US on the same income. That amount may turn out to be lower than the amount actually paid in the foreign country.
You enter foreign tax paid under the Taxes Paid Topic under Deductions and Credits. You can enter the full amount of foreign tax paid but, remember, you will only be credited for the amount you would have paid on the income in the US. Your tax paid in the other country when purchasing the real estate may not be a tax normally paid here in the US and would likely not be included in your credit. If, on the other hand, it was property tax paid at settlement, you would include it on the Schedule E for rental income, translated into US dollars on the date paid.
