italy-us double tax agreement

Forum|Forum|3 years ago
March 6, 2023
1 reply
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I am a green card holder living in US, Italian citizen. In Italy I receive rental income from some property and I pay Italian taxes on the income.

Do I need to report on schedule E the Italian rental income or does the italy-us double taxation agreement apply on passive Italian rental income?

DaveF1006

Yes, you will need to report your foreign income in the rental income section of your return but you may claim a foreign tax to offset the taxes you paid to italy. Here is how to report to receive your credit.

Go to federal>deductions and credits>estimate and other taxes paid
Foreign taxes >start
Answer the questions in the next screens until you reach a screen that talks about income type. This will be a passive category of income.
Next screen is where you add the country your foreign income was earned in.
Next screen will ask you what your source income earned in that country. Here you will allocate income earned while you were in that country. You only have the country of italy to report here.
You will continue answering questions until you get to a screen that says foreign taxes paid to XXXX. Be sure not to list a date at the bottom beyond 12/31/2022 or you won't get the foreign tax credit and will show up as an error in your return

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giulianaAuthor

Hi Dave, Thank you for your reply.

I have another question. Suppose my US earned income is taxed at 32% tax bracket and my net foreign rental income (after depreciation and foreign taxes ) reported on schedule E is about 8,000 dollars. Would be my tax refund higher if I would not have the foreign rental income of 8,000 dollars? how much higher would be the refund? How can I calculate how much higher would be the refund?

Thanks

DaveF1006

It is difficult to give an estimate of what tour tax consequence is without looking at your entire return. For an example, if you did exclude the $8000 income, your refund may be ($8000 X .32=$2560) more but there may be other factors that may either reduce or enhance that amount.

If you take a foreign tax credit, the IRS limits the foreign tax credit you can claim to the lesser of the amount of foreign taxes paid or the U.S. tax liability on the foreign income. The excess limit is created when the U.S. taxes on that foreign income are greater than the foreign taxes paid.

As a suggestion and if you are using Turbo Tax Online, you might select the ask the expert option in program. Here the expert will have the ability to look at your return and may be able to determine an estimate on how much higher of a refund that you will receive.

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