{"id":245,"date":"2022-10-26T15:42:02","date_gmt":"2022-10-26T15:42:02","guid":{"rendered":"https:\/\/hrbcomlnp.hrblock.com\/expat-tax-preparation\/resource-center\/?p=245"},"modified":"2024-04-16T15:53:11","modified_gmt":"2024-04-16T19:53:11","slug":"reporting-foreign-rental-properties-to-the-irs","status":"publish","type":"post","link":"https:\/\/hrbcomlnp.hrblock.com\/expat-tax-preparation\/resource-center\/income\/real-estate\/reporting-foreign-rental-properties-to-the-irs\/","title":{"rendered":"Foreign Real Estate: How to Report Foreign Rental Property to the IRS"},"content":{"rendered":"\n

Owning a foreign rental property is the ultimate dream for many Americans \u2014 expat or not. But, as it turns out, buying that mountain ch\u00e2teau or coastal hacienda can come with some major tax implications \u2014 even more so if you want to make some extra cash by renting it out.<\/p>\n\n\n\n

Don\u2019t worry, though \u2014 we\u2019re here to help you sort out your foreign property reporting requirements (both rental and otherwise) so you can get back to enjoying it. Ready to get started with this year\u2019s reporting? No matter where in the world you are, we\u2019ve got a tax solution for you. Get started with our made-for-expats online expat tax services<\/a> today!<\/strong><\/p>\n\n\n\n

File on my own<\/a><\/div>
File with an advisor<\/a><\/div><\/div>\n\n\n\n

Buying property overseas? Learn the tax implications first.<\/h2>\n\n\n\n

Before you jump into the deep end of homeownership (or land ownership) in a foreign country, you should get to know your foreign property tax reporting requirements.\u00a0Yes, you must report foreign properties to the Internal Revenue Service (IRS) on your U.S. tax return just like you would report any owned United States property.<\/strong><\/p>\n\n\n\n

To do that, you first need to know what type of foreign ownership you have because it affects what tax forms you must file. Many countries have rules on who can and can\u2019t buy land or homes, and foreign buyers are frequently in the \u201ccan\u2019t\u201d group. That doesn\u2019t mean you should ditch your dreams of having the top-listed Airbnb rental, though \u2014 some countries allow international buyers to own such properties through specific entities like corporations or trusts.<\/p>\n\n\n\n

For example, in Mexico<\/a>, foreigners may not own property in certain regions. To get around it, many foreigners set up what\u2019s known as a Fideicomiso, which functions as a land trust and allows them to hold Mexican real estate.<\/p>\n\n\n\n

If you set up an entity to own the property (like a corporation or trust)<\/strong>, you may have more yearly reporting requirements depending what type of entity owns the property. These include Form 5471<\/a>, FATCA Form 8938<\/a>, Form 3520<\/a>, and possibly Form 926<\/a>. When you file with an H&R Block Expat Tax Advisor<\/a>, they can walk you through other exceptions and tax implications from the different types of entities.<\/p>\n\n\n\n

If you own the property outright,<\/strong>\u00a0congratulations \u2014 you likely have fewer reporting requirements than if it was set up as a trust or foreign corporation. In that case, you would not have to report the property on Form 8938 or the other forms if owned individually.<\/p>\n\n\n\n

If you inherited the property,<\/strong>\u00a0check what type of ownership you have. You\u2019ll have the same reporting requirements as if you bought it, and you\u2019ll have to file\u00a0Form 3520<\/a>\u00a0if the inherited foreign property is worth more than $100,000 and the decedent was not a United States citizen or resident.<\/p>\n\n\n\n

How to report overseas rental income to the IRS<\/h2>\n\n\n\n

If you rent out a foreign property you\u2019re taxed on that rental income. To report income gains and losses, you first need to convert all currency to USD. Then you need to know how many days you either rented out your property or lived in it to figure out the tax treatment.<\/p>\n\n\n\n

Owner’s Usage<\/strong><\/td>Rental Usage<\/strong><\/td>Tax Treatment<\/strong><\/td><\/tr>
0 Days<\/td>1-365 days<\/td>Rental property<\/td><\/tr>
Less than 15 days<\/td>15+ days<\/td>Vacation home AND rental property<\/td><\/tr>
More than 14 days<\/td>15+ days<\/td>Vacation home AND secondary residence<\/td><\/tr>
15+ days<\/td>Less than 15 days<\/td>Not reportable<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

While most taxation and reporting of foreign rental income is the same as it is with a U.S. rental property<\/a>, there are some exceptions. If you are using a foreign property for rental income, you will be able to deduct the following on your U.S. tax return:<\/p>\n\n\n\n