Foreign Real Estate Taxes deduction?

[Mis Ta]

Hi,

I have purchased a property overseas. All cash, no loan/lender. Are local real estate taxes related to this purchase deductible? If so, what is the right location where I should enter the data? 

[DoninGA]

Yes, you can report the real estate taxes on the foreign property as an itemized deduction on your tax return.  The amount paid will have to be converted into US dollars before being entered on the tax return.

To enter, edit or delete Property Taxes -
Click on Federal Taxes (Personal using Home & Business)
Click on Deductions and Credits
Click on I'll choose what I work on (if shown)
Under Your Home
On Property Taxes, click on the start or update button

Or enter property tax in the Search box located in the upper right of the program screen. Click on Jump to property tax

[Mis Ta]

Thank you for such a quick response! That's what I thought initially. The above takes me to "Enter any additional property tax paid in 2022". So far so good. I even see a field called Foreign real estate taxes. However, when I enter my amount I see the following message:

We need a bit more info to see if you qualify
Checking for Property (Real Estate) Tax Deduction

From there there are two buttons: Skip for now (which brings me back to the overall Deductions and Credits section) or Enter Info. When I click that, I'm back in the "Enter any additional property tax paid in 2022" section I just visited. 

Is it an issue with the software? 

[DoninGA · Accepted solution]

@Mis Ta Yes, that is a bug in the software.  You can go ahead and enter the real estate taxes paid in the box for Tax on additional homes or land.  This will have the taxes paid entered on Schedule A for itemized deductions on Line 5b, exactly where is should be entered.

I will go ahead and report the bug to the TurboTax Moderators of this forum to forward to the TurboTax programmers.

[rjs]

The only problem in TurboTax is that the screen does not clearly tell you what you are supposed to enter. If you enter what it expects, the software will work correctly.

You are supposed to enter all of the real estate tax that you paid, including any foreign tax, in the first two boxes, for either your main home or other property. In the box for foreign real estate taxes you are supposed to enter the portion of the tax in the first two boxes that is foreign. So the amount of foreign real estate tax should never be more than the sum of the other two boxes. When you enter it this way, TurboTax will simply accept it, and you will not get any strange behavior in the interview.

Under the new tax law that was passed in 2017, foreign real estate taxes are not deductible on the federal tax return for years 2018 through 2025. When you enter the taxes as I described above, TurboTax will subtract the foreign tax from the total tax, and report the amount that is not foreign, if any, on federal Schedule A.

TurboTax is asking for the total amount of tax, and how much of the total is foreign, in case you are filing a return in one of the few states that still allows a deduction for foreign real estate tax. If you are, the appropriate amounts will automatically be entered on your state tax return.