[Bonallack]

I have received conflicting information on whether losses from an overseas (New Zealand) property investment is in any way tax deductible against my regular income, or against any US capital gains.

This breaks down into two questions.
1. Are the annual losses while I still own the property tax deductible (income from rent = $20,000, costs including mortgage are $35,000)?
2. If I sell the property and make a loss (which I would), is the loss deductible from my income, or deductible from income I might have from capital gains?

And 2a (this was suggested to me):
- Does the sale of the property make the losses accumulated while I owned it tax deductible?

My accountant has said no, as I earn more than $150,000. My bank's accountant said that 2a is true - i.e. when I sell the property, I can realize all the losses made while I owned it.

My own reading seems to indicate that none of these losses are deductible - but wanted to check.

Thanks
Daniel

[AtlantaTaxExpert]

Assuming you are a U.S. citizen or resident who files Form 1040, your accountant is correct. The annual loss on the property is NOT deductible on an annual basis due to passive loss limitations which are triggered by your high earned income.

However, those accumulated losses CAN be added to the basis of the property, and any loss on the sale IS deductible against other capital gains. However, any loss over those other capital gains are limited to $3,000 per year. The loss is carried forward from year to year until you use it up.