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June 4, 2019
Question

Mortgage interest paid for co-owned property in foreign country.

  • June 4, 2019
  • 1 reply
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Where do I enter this information? Should it be under Wages & income -Rental property section of Deductions & credits - Mortgage interest, refinancing and insurance section? How do I amend if I have enter in the wrong category for last year? Thank you.

1 reply

Employee
June 4, 2019

You didn't specify in your question whether this foreign real estate property is intended to be your personal residence (as a second home); or whether it is instead treated by you as an investment property; or if it is instead a rental property.  Therefore, let's address all three possibilities.

First, if it is your private home, then you can deduct your property taxes paid, as well as mortgage interest paid, in the same place (Form 1040, Schedule A, Itemized Deductions) that you would if the home were located in the United States rather than overseas.  That is, you will treat the property just the same for tax purposes, and you can deduct property taxes and mortgage interest in the same place (please see the attached screen-capture image #1 below this text for a visual illustration).

Second, if the foreign property is a non-income producing property but not a home (i.e., an investment), then you can deduct the property taxes as in screen-capture # 1 (on Schedule A), but will deduct the mortgage interest costs instead as an investment expense (Form 4952).  To find where to mechanically enter this in TurboTax, you can look to screen-capture images # 2 and # 3.

Third, if your foreign property is an income producing rental property, then you will need to create a (Form 1040) Schedule E.  (Please see screen-capture image # 4 to see where to begin.)  You would enter all of your property taxes and mortgage interest paid there, as expenses to offset your rental income (or to take a net loss).

With respect to your question about amending a prior year return:  you should do so only if changing the mortgage interest paid deduction you did claim in that prior year changes your income tax liability (or refund).  In other words, only if it makes a difference to your actual taxes owed (or refund) should you amend.  Do not amend a tax return simply to move one deductible item from one line to another, in the absence of any income tax difference.

That said, however, the only way for you to know for certain if any change(s) do make a material difference will be to actually go through the mechanical amendment process and find out if it is so.

Thank you for asking these important questions.