VAT on foreign real estate property tax deductible in USA ?

[Enthusiast]

I am US resident for tax purpose. Last year, I bought real estate property in foreign country by taking home loan throgh foreign bank lender. I also paid Value Added Tax (VAT) or TDS ( Tax Deducted at Source) for real estate property, Stamp Duty and Registration fees and Lawyer charges. What of these mentioned expenses can be claimed as deduction for US tax filing ? Are those categorized as property taxes OR foreign sales tax? Keep in mind, I dont file tax return in that foreign country as I dont earn any income in foreign country.

[CarolynM · Accepted solution]

Yes, these are deductible as property taxes. 

Here is the IRS language: 

Deductible real estate taxes are generally any state, local, or foreign taxes on real property levied for the general public welfare. The charge must be uniform against Foreign all real property in the jurisdiction at a like rate. Source IRS on Property Taxes

[Enthusiast]

Thanks. I read on few posts that Stamp duty and Registration fees are not deductible as they count towards cost basis for the real estate property. I am pretty sure that, I can deduct VAT out of all those charges. I am still little confused about Stamp duty and registration fees, as they are almost 5% of total property assest value.

[Enthusiast]

Thanks. I read on few posts that Stamp duty and Registration fees are not deductible as they count towards cost basis for the real estate property. I am pretty sure that, I can deduct VAT out of all those charges. I am still little confused about Stamp duty and registration fees, as they are almost 5% of total property assest value.

[CarolynM]

If this property is investment income, you can include them as investment expenses

[CarolynM]

lawyer fees too

[Enthusiast]

Thanks for your prompt replies and good clarifications. Unfortunately, this real estate property will be under construction for 2 years and after that will be used for family. So, I won't earn any income out of that. I guess, I can still deduct VAT and lawyer charges, but not stamp duty and registration fees. Please correct me if I am wrong.

[CarolynM]

Correct

[Enthusiast]

Thanks. I appreciate your responses.

[valeriejtom]

Is there an IRS reg. you can site to support this position?

[jfkn]

Can TurbotaxCarolynM answer my question? I am getting contradicting answers.  I am US resident for tax purpose. This year 2018, I bought real estate property in foreign country. It is just a residential house construction lot. My intention is to built a second home on the lot. I also paid Value Added Tax (VAT) for real estate property, and registration fees. The tax exceeded $10000. (it is in EU, but not UK). From the answers for Enthusiast I understand the VAT is deductible. What I do not know where to enter it in Turbotax 2018 Home & Business.

[taxpayer0065]

I'm in the same position and bought property (2021) overseas in the EU.

You cannot deduct the VAT (based on the TCJA 2017 act) as an itemized deduction or claim it as a Foreign Tax credit.  As a foreign tax credit is only eligible if you have income earnings overseas.

Hope this helps