[aureliedlb]

Hello,

I have a mortgage in a foreign country for a house.
I'm renting the house.

So I'm using :
A - schedule E for the rent, I claim the mortgage line 12
B - form 1116 to claim foreign taxes, I declare the mortgage line 4
C - schedule A, for itimized deductions where I claim the mortgage line 11

So with this way, I'm claiming twice the interests paid on my mortgage ?
Is it the good way or do I have to choose between a and b ?

Thanks a lot !

[AtlantaTaxExpert]

No, it does NOT work that way.

You claim the mortgage INTEREST on Schedule E. You claim any PROPERTY taxes paid on the rental unit on Schedule E.

You do NOT claim the mortgage interest a second time on Schedule A, as that is considered tax fraud.

On Form 1116, you claim the taxes paid to your home country on the rental income, IF any taxes are due. The mortgage and property taxes are NOT considered on Form 1116.

[ebaines]

You can only claim a mortgage interest deduction on Schedule A for your personal residence or second home, but not for business property. So you have to remove that deduction from Schedule A.

[aureliedlb]

Yes that's what I thought.. thanks for the explanation.

So as I will pay in 2012 taxes on the income and on the property for the year 2011, I can't use F1116 for 2011.
Next year, I will use F1116 2011 and claim the credit ? I'm confused...

Thanks again

[AtlantaTaxExpert]

Okay, let's assume that your rental property rents for $10,000 for the year, and you have $6,000 in expenses, which means you show a $4,000 profit.

You report this $4,000 profit on the home country tax return and pay $800 in taxes ON THE RENTAL INCOME.

That $800 is what you will claim on the Form 1116, while reporting the $4,000 in passive income.

[aureliedlb]

Ok,

But I will only pay these $800 in taxes on June 2012.
So I can't claim them this year on my 2011 tax return ?
If yes, will I be able to claim them next year on my 2012 tax return ?

Thanks again for your patience !

[AtlantaTaxExpert]

You claim it ONLY on the 2012 tax return; you CANNOT claim a credit for 2011 if the tax is paid in 2012.

[aureliedlb]

OK, I just have to wait a year...
But if I'm able to claim them next year that's the most important.

Thanks a lot !

[AtlantaTaxExpert]

Glad to help!