Real estate purchase overseas for personal use

[rustam228]

If I purchase home outside of USA can turbotax support me? house will not be used for rental, just for personal use and price will be below 100000$. What I need to know is: Do I have to pay taxes to USA for home or appartament owned for personal use outside of usa?  I have one home in USA which is my main residence and I live in USA.

Also If I purchase home overseas I have to transfer my money from US bank to foreign bank and I know I have to report it to FBAR if it is more than 10 000$, but I dont know if USA will tax my foregn bank account which doesn't make money for me and will be used for home purchase. Please advise.

[Critter]

Do I have to pay taxes to USA for home or appartament owned for personal use outside of usa?  There are no income taxes on any property you own anywhere.

Also If I purchase home overseas I have to transfer my money from US bank to foreign bank and I know I have to report it to FBAR if it is more than 10 000$, but I dont know if USA will tax my foregn bank account which doesn't make money for me and will be used for home purchase.  Only income is taxed on an income tax return.  Moving money overseas may need to be reported however it is not a taxable event. 

[SusanY1]

No, you do not have to pay US taxes on a home owned outside of the US for personal use.  

There is no US tax for owning property outside of the US, and you may be able to deduct interest paid on any mortgage that you may have. You cannot deduct any foreign property taxes.

Mortgage interest on a second home is deductible on your tax return for taxpayers who itemize their deductions.  You can deduct interest on a second home that:

1. Is not rented; and
2. It satisfies all of the same requirements as deductible interest on a primary residence. 

The mortgage interest deduction is subject to the same limitations as your primary mortgage. You can find everything you want to know about home mortgage interest deduction by clicking on this link: IRS Publication 936.

There is also no tax on the transfer of funds to a foreign bank.  You would report only interest or dividends that you earn on the deposits on your tax return. 

The FBAR reports are informational only, and there is no tax associated with filing them. 

TurboTax doesn't support this form.  However, you can easily file your FBAR at this website: BSA e-Filing System. 

TurboTax can help you take advantage of any tax breaks associated with your purchase. I am happy to inform you that you will not have any additional US tax due on this purchase under current tax law.

[rustam228]

First of all  Thank you for your quick  and detailed reply.

Overseas Real estate  I just asked about does not exists yet, I'm asking prior to purchase,

also it will not be put in mortgage in that country, it will be one time purchase as it is not that expensive.

I don't have intent to claim anything form USA even if it is in mortgage and even if there is home tax in that country. I don't need any tax deduction or support from USA for having that overseas property. I just want to make sure I do everything right for tax purposes.

What is interesting for me :

1) If I purchase home outside of USA then IRS will  or will no tax me for owning  that PERSONAL property.

You answered NO. Correct?

2) When I buy that property -  I have to create and  report my overseas bank account which will receive money more than 10000$ from my US bank account (for example I will transfer 40 000$ from USA). This money I will use for purchasing real estate. Do I have to pay taxes on those transferred overseas 40 000$  which I earned in USA and already payed taxes, just because these 40 000$ will appear on my overseas bank account.

You answered - NO. Correct?

Please correct me if I understand you wrong.

[SusanY1 · Accepted solution]

You're welcome and yes, you understand correctly!

The IRS will not tax your overseas home purchase - there is no federal property tax.  

Just as there is no tax when you move money between your personal accounts inside the United States, there is no tax when you transfer the funds outside of the US.

As you correctly noted, there is a reporting requirement when you have a balance of $10,000 or more in a foreign bank account, but this does not create any tax liability.  

[rustam228]

I appresiate your help.

one last question:

The year when I purchase house/appartment outside of USA for personal use do I have to report it in my tax return for that year ? Is there any requirement to report it. Just for report that I have it!! I understand from your answer that there is no tax for personal usage.

Im asking because in the future I may rent it and it should appear in my taxes in future as income. How IRS will react in the future if i decide to rent it.  

possible scenario: purchase in 2021for personal use. report required or not for IRS, just report for having it.

2024 decided to rent it. have to report income yes.

[SusanY1]

Using your scenario, you would not report anything on your tax return until 2024, the year you convert the property to a rental (in part or in full.)  

In the year that you begin to rent the property or make it available for rent, you will start to list your income and expenses on Schedule E of your tax return.  

At the time of the purchase for personal use, you have no reporting obligation.  

Happy house hunting!

[rustam228]

I appreciate your quick replies, clear answers and patience.

It is very important to know all this in advance.

[SusanY1]

You're welcome and I agree, it's best to be prepared!