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-   -   Foreign rental property and mortgage interest (https://www.askmehelpdesk.com/showthread.php?t=323588)

  • Mar 1, 2009, 01:31 PM
    jvonschoen
    Foreign rental property and mortgage interest
    I just found out that I should be claiming by rental property in Germany. That means I need to amend the last 4 income tax returns. I am a US citizen and spouse is a Green card holder. Where do I claim the rental income and mortgage interest paid to the foreign bank. TaxCut keeps asking me for the state not country on the rental property... HELP PLEASE! Thanks!
  • Mar 1, 2009, 07:43 PM
    IntlTax

    Yes, you need to include the rental income and expense on your U.S. tax return. You should include on Schedule E of Form 1040. Depreciate the building over 40 years, straight-line. The mortgage interest should also be shown on Schedule E.

    Since you reside in the U.S. and the lender is a foreign bank, you are required to withhold 30% tax on the interest portion of the payments, unless a lower treaty rate applies. If you want to rely on the treaty, you need to obtain a Form W-8BEN from the foreign bank where the bank certifies that it qualifies for treaty benefits. In either case, you will need to also file Form 1042 and 1042-S reporting that you made interest payments to a foreign person.

    The withholding tax rate under the U.S.-Germany Treaty would likely be 0% (if you can get a W-8BEN from the bank).
    See also https://www.askmehelpdesk.com/taxes/t...ry-181648.html
  • Apr 28, 2009, 01:33 AM
    Amabroad

    I am a US citizen residing abroad. My husband (nonresident alien) wants to fix up an apartment we own, rent it and put the rent in his own personal savings account. I file "married filing separately". Do I have to declare any part of the rental income? How much? Thank you.
  • Apr 28, 2009, 03:19 AM
    MukatA

    Any rental income, which is your share, is your income to be reported on the U.S. tax return. You can deduct expenses for repair and maintenance.
    If you pay tax in foreign country, then you will file form 1116 -- Foreign tax credit.
  • Apr 28, 2009, 05:13 AM
    IntlTax

    You mention "an apartment we own." If you jointly own the property with your husband, then you are entitled to half of the profits and are taxed on half of the profits, even if the cash goes directly into your husband's bank account.

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