Hi,

We are US expats in Dubai. We are Bona Fide Residents of Dubai, UAE and file a US 1040 (and utlize the Foreign Earned Income Exclusion).

This is a two part question.

One - can we deduct the Mortgage Interest on the home? Can't find anything in IRS Publications that states 'where' the Primary Residence has to be located. So I believe I can. If I can, what form will be required to submit with my tax return as the bank does not provide an interest statement like they do in the USA?

Two - as we just bought it in 2008 - what deductions for the 'closing' costs, bank fees, loan fees, agent commissions would be deductible? If any? And again, what documentation would be required to submit with return as we will not receive a "HUD Statement"? Cancelled checks with invoices?

Thanks so much

1) You CAN claim the mortgage on your foreign home, but the IRS may require that you "withhold" 30% of the payment and send it to them. I doubt that your foreign bank would approve of that.

2) The only items deductible are property taxes and anything that represents pre-paid interest, like discount points.