[srmcg]

Hi.
I would greatly appreciate it if someone could help me understand what I need to do as explained in the following:
I am a US permanent resident. I have an apartment in my home country I rent out.
My country and the US has a double taxation treaty agreement which covers that I do not pay take on the same things in both countries.

I found the following paragraph with regards this and rental income (note: State refers to that country - not a US state):
"How does a Double Taxation Agreement prevent my income or gains being doubly taxed?
If your income or gains is chargeable to tax in the State and in a country with which the State has a Double Taxation Agreement, a double charge to tax is prevented under the agreement. This is generally provided by either -
(1) crediting the foreign tax paid against your State tax liability on that same income or gains or,
(2) in certain circumstances, by exempting that income or gains from tax in either the State or the other country."

So I am thinking I do the following:
(a) Do tax return in home country for the rental property - Rental Income less expenses etc (depreciation not allowed) - and pay the tax calculated there (if it works out I owe taxes).
(b) In US tax return I treat the property the same in schedule E - Rental income less expenses and depreciation (40 yrs)(which allowable expenses are different than in home country)- and pay tax here or get a further refund because it will come out as a big loss here due to the depreciation included.
(c) In US tax return I also complete form 1116 for the foreign tax credit for the tax paid in the home country per point (a). This should work out as a straight dollar for dollar credit.

Is this correct?
Can I do (a) and (b)? Or should I do (a) or (b)?
I think I have to do the tax return for the home country anyway so I must do (a). I am just confused if I am allowed to do (b) then.
Or do I the choice to pay the tax in the US instead - and because of the different expenses treatment here I won't pay tax on it therefore don't need to claim tax credit in home country.
I guess if the home tax return yields I don't pay tax I don't need to do (c).

Or is there a different way the handling of this should be approached?

Thanks very much in advance.

[AtlantaTaxExpert]

You must claim the rental income on your U.S. return because ALL world-wide income is subject to U.S. taxes if you file as a resident. For this reason, submit the rental data on Schedule E and show the net income or loss.

Now, if you also file a tax return in your home country and pay taxes on the rental income, claim that rental income and tax on Form 1116 as passive income.

If you need professional help filing your U.S. return, email me at the email address in my signature. If my signature cannot be seen, you can find the email address in my profile.

[srmcg]

Thanks again for your valuable advice. I really appreciate it.

So what I am taking from your answer is that it is OK for me to the tax return for the apartment rental income in my home country and also in the US. Which means I do (a) (b) and (c).

[AtlantaTaxExpert]

Correct: A, B AND C.

[srmcg]

Hi.

Id like to revisit this question again for re-confirmation or clarification.

I have been told that since I do a tax return on the rental property in the foreign country (yields a profit on which I pay tax there) I can therefore not do a Schedule E in the US.
Is that correct? Or can I still do a schedule E here too (which yields it as a big loss due to depreciation added in)?

[AtlantaTaxExpert]

As I originally posted, ALL world-wide income (before deductions) MUST be reported on the U.S. income tax return.

That includes rental income.