Rental Income Deduction

[marctax84]

Hi, I have a foreign rental property that I rented out the first time. I paid 1/2 months rent to the broker as commission for 6 months rental which to my understanding tax deductible from the rental income. However, I also paid my uncle for showing the property and for being my attorney in fact to rent my property which is six thousand miles away from the United States. Can I deduct the fees I paid my uncle, in addition to the comission I paid to the agent?

[Critter-3]

Sure but if you pay your uncle and deduct it on the Sch E then the uncle has to put it as income on his return. 

[marctax84]

He is not a US person and has no affiliations with the United States. Does he still have to pay?

[PattiF]

You will report the rental on Schedule E in the Rental Section. The commission to the broker would be entered in expenses as commission. The rental expenses that you paid to your uncle can be added to management expenses.

Here are instructions to set up your rental property in TurboTax from Coleen3, Intuit Alumni:

There is no difference in US tax reporting if the property is in the US or abroad. You will calculate your net rental income on Schedule E.

Report this income under Rental Property, and be sure to indicate the location is in a Foreign Country (See the attached screenshot below. Click to enlarge.)

Go into your TurboTax return. Not sure you're in there? Click on the orange Take me to my return button.

1.       Search for rentals and then click the "Jump to" link in the search result.

2.       Answer Yes to the question Did you have any rental or royalty income and expenses?

3.       Follow the on-screen instructions as you proceed through the rental and royalties section.

o    We'll first ask you to enter general information about your rental (description, address, ownership percentage, etc.) 

o    Eventually, you'll come to the Rental Summary screen which is where you enter your:

·         Rental income

·         Rental expenses

·         Capital assets and depreciation

·         Vehicle expenses

The only difference you will encounter is the type of depreciation you are required to take when it is foreign property. It will need to be depreciated over 40 years instead of the normal 27.5

If you paid Foreign Income Tax on the profit from your rental, you may qualify for a Foreign Tax Credit or a deduction. Follow these steps to see enter information about the foreign income tax you paid in TurboTax:

• Open (continue) working on your return in TurboTax.
• Enter your foreign rental income and expenses.
• If you have any other foreign income, enter it before continuing.
• Search for the foreign tax credit, then click the "Jump to" link in the search results.
• Click Continue and carefully follow the onscreen instructions. Note that rental income is considered Passive Income.
• In most cases, taking the credit works out better than the deduction. TurboTax will help you decide which one is best for you when you go through the foreign tax screen.

@marctax84