I live in Germany and bought a house there with a local bank doing the financing.
Can I deduct the interest paid (by converting the Euros to Dollars) to the German bank on my US income tax return? I have no otherproperties and earn my income completely overseas. Thanks for any help, this is my first year in this situation and I could use the deduction! :-)

Yes, you CAN and SHOULD deduct the mortgage interest on your U.S. tax return.

Because you live overseas, you need not fear the IRS requesting that you withhold 30% of the payment to cover U.S. taxes on the bank, because it does not apply if the U.S. citizen is living overseas.

Dear AtlantaTaxExpert,

THANK YOU for clearing this up; I looked into the IRS website and didn't see anything excluding this deduction.

:-)

A VERY Grateful -

Retiredexpat

Glad to help!

I'm using Turbotax. Do you think it'll be a problem to enter this into the data, since I won't get a US form? Also, I calculated the annual 2012 average Euro to USD rate, so once I get the form from the German bank, I should just convert it and enter this as mortgage interest. Thanks again for the help!

I do not think it will be a problem with TurboTax, though you will have to enter it direct on the Schedule A.

If it is a problem, switch to TaxAct.com.

Wilco.

Thanks again AtlantaTaxExpert... you ROCK!

:-)

V/R - Retiredexpat