Foreign Rental Income and Taxes

Forum|Forum|1 year ago
April 1, 2025
2 replies
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Hi! I pay taxes on the rental income from properties in the local country. How do I record them in Turbotax to avoid double taxation?

Thanks!

PatriciaV

Employee

Yes, you may qualify for the Foreign Tax Credit if you paid foreign taxes on foreign income.

Find this page by searching on "foreign tax credit". Use the "jump to..." link to go to the start of the section. Answer that you do wish to take the credit (instead of an itemized deduction), then follow the prompts to enter your information.

Generally, taking a Foreign Tax Credit on Form 1116 gives you a lower tax bill than if you deduct any foreign taxes paid as itemized deductions.

Here's why: when you itemize deductions on Schedule A, each dollar of deduction reduces your taxable income. When you take a foreign tax credit, each dollar of tax paid reduces your income tax.

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pk12_2

Employee

@RoaringKitty ,

(a) Are you saying that your tax home is foreign or USA ?

(b) Which country is the rental property located in ?

Generally, the reporting of rental income from foreign property is pretty much the same as for domestic property -- reported on Schedule-E. The only major wrinkle is the depreciation of a foreign residential is now 30 years ( used to be 40 yrs, same as domestic commercial prop.).

Please answer my questions so the answer can be more specific to your situation --yes ?

RoaringKittyAuthor

(a) Are you saying that your tax home is foreign or USA ? USA

(b) Which country is the rental property located in ? India

AmyC

Employee

You are filling the rental property on Sch E. You can claim the foreign tax credit on Form 1116. See Where do I enter the foreign tax credit (Form 1116) or deduction? Note, you can try both options. The credit is most commonly used.