All income earned by citizens and permanent residents of the United States must be reported to the Internal Revenue Service; whether it is earned within or from outside the United States. So if you have rental property in another country, you must file a Schedule E alongside your Form 1040 to disclose your foreign rental income; else, you will be subject to a penalty.
So, are you interested in renting out your beach house in Europe or an Airbnb in Canada? And you wish to learn how to file your rental income from abroad with the IRS. There are US tax concerns to keep in mind and these tax requirements can be complex. Why? The IRS regulates how many days a person can use their property for rental purposes.
In this article, we will guide you on how to report foreign property rental income in a simple manner. We will highlight some of the rules for foreign rental income. And also, we compared Foreign vs. American tax advantages; to give a clear picture of what you are doing.
Income from renting out your property in another country is known as "foreign property rental income" and the following rules govern you in filling your foreign rental income:
A few anomalies apart, owning real estate outside the United States and benefiting from tax breaks is very similar to doing so here at home. Property owners in the United States are taxed according to how they use their land. Mortgage interest, liability insurance, and maintenance costs can all be deducted if they rent out their home.
Mortgage interest, upkeep, repairs, utilities, insurance, management fees, and depreciation can all be deducted by Americans residing abroad. Depending on the rental start date, a dwelling abroad depreciates between 30 and 40 years, but a home in the United States depreciates between 5 and 10 years (27.5 years). You just depreciate the building's worth in every situation.
Here's how to report overseas rental income gains and losses to the IRS.
Any and all rental income must be reported to the Internal Revenue Service. Even if you have a negative net income from your foreign rental property, you must still file Schedule E to record the rent you received as well as any deductions you incurred. This is the only way you can escape any form of punishment.
Barbara Fielder is an independent and passionate writer. She works with several reputable platforms and blogs. She's also an explorer that loves traveling, and she speaks 3 different languages fluently. She looks forward to helping her readers with her writing and research skills.