Reporting Foreign Real Estate and Rental Income on Your U.S. Tax Return
Investing in property abroad is a great way to diversify your assets—but it also comes with U.S. tax obligations. If you own foreign real estate or earn rental income from property overseas, here’s what you need to know.
🏠 Foreign Real Estate Is Not Reported on FBAR (Unless…)
The property itself isn’t reported on the FBAR. However, foreign financial accounts holding rental income or used to purchase the property must be reported if they exceed $10,000 at any point in the year.
💰 Rental Income Must Be Reported
All rental income, even from a property located abroad, must be reported on Schedule E of your U.S. tax return. You can deduct:
- Property taxes
- Mortgage interest
- Repairs
- Depreciation
- Management fees
🌍 Foreign Taxes Paid? Use the FTC
If you pay tax on rental income in your host country, you may be able to use the Foreign Tax Credit (Form 1116) to offset that U.S. tax liability.
🧾 Capital Gains Apply on Sale
If you sell foreign real estate, you must report the gain (or loss) to the IRS—even if you don’t pay tax on it abroad. The Primary Residence Exclusion may apply if you’ve lived there for at least 2 of the last 5 years.
Foreign property can add complexity to your return, so it’s wise to work with an expat tax specialist to stay compliant and avoid double taxation.
