US tax on foreign rental income

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Everest1
Posts: 11
Joined: Wed Oct 06, 2021 6:15 am

US tax on foreign rental income

Post by Everest1 »

I get rental income in India and pay taxes there. I am a US citizen.
I have also been declaring the rental and interest income from India on my US tax return and paying US taxes taking a credit for Indian taxes paid ( which is very small as I do not have any other income in India )
Am I doing it right ? My friends have questioned whether I have to pay US taxes since I already pay taxes in India.

Any help would be appreciated.
exodusNH
Posts: 3583
Joined: Wed Jan 06, 2021 8:21 pm

Re: US tax on foreign rental income

Post by exodusNH »

Everest1 wrote: Thu May 12, 2022 12:12 pm I get rental income in India and pay taxes there. I am a US citizen.
I have also been declaring the rental and interest income from India on my US tax return and paying US taxes taking a credit for Indian taxes paid ( which is very small as I do not have any other income in India )
Am I doing it right ? My friends have questioned whether I have to pay US taxes since I already pay taxes in India.

Any help would be appreciated.
You were doing it right, AFAIK. The US has pretty onerous rules regarding taxation of its citizens. It makes it difficult to for us to retire in foreign countries. And if you give up your citizenship, you get an exit tax on assets!

It's not really any different than getting a Federal tax break on income and property taxes paid to a state.

If you have a bank account in India, make sure you've declared that to the IRS as well. There are punishing penalties for failure to report those.
SlowMovingInvestor
Posts: 3173
Joined: Sun Sep 11, 2016 11:27 am

Re: US tax on foreign rental income

Post by SlowMovingInvestor »

Everest1 wrote: Thu May 12, 2022 12:12 pm I get rental income in India and pay taxes there. I am a US citizen.
I have also been declaring the rental and interest income from India on my US tax return and paying US taxes taking a credit for Indian taxes paid ( which is very small as I do not have any other income in India )
Am I doing it right ? My friends have questioned whether I have to pay US taxes since I already pay taxes in India.

Any help would be appreciated.
You are correct, but you should also be able to deduct expenses on your rental property in your US return irrespective of whether you can deduct them on your Indian return or not.
SlowMovingInvestor
Posts: 3173
Joined: Sun Sep 11, 2016 11:27 am

Re: US tax on foreign rental income

Post by SlowMovingInvestor »

exodusNH wrote: Thu May 12, 2022 1:09 pm
Everest1 wrote: Thu May 12, 2022 12:12 pm I get rental income in India and pay taxes there. I am a US citizen.
I have also been declaring the rental and interest income from India on my US tax return and paying US taxes taking a credit for Indian taxes paid ( which is very small as I do not have any other income in India )
Am I doing it right ? My friends have questioned whether I have to pay US taxes since I already pay taxes in India.

Any help would be appreciated.
You were doing it right, AFAIK. The US has pretty onerous rules regarding taxation of its citizens. It makes it difficult to for us to retire in foreign countries. And if you give up your citizenship, you get an exit tax on assets!

It's not really any different than getting a Federal tax break on income and property taxes paid to a state.
It is different, actually.

You can get a deduction on income/property taxes paid to a state (with limits) on your Federal return, but you can take a credit against foreign taxes on a dollar for dollar basis, which is more beneficial than a deduction most of the time.

A few US states also allow you to take a credit for foreign taxes paid on your state tax return.
goos_news
Posts: 172
Joined: Mon Jun 10, 2019 7:14 pm
Location: Northern California/French Riviera

Re: US tax on foreign rental income

Post by goos_news »

as others noted, you are doing it correctly

Just make sure you are taking depreciation on the property on the US taxes and accounting for any allowable expenses. There may be differences in handling of the allowable expenses in the Indian tax system versus the US. I (or rather my two accountants) have to do this (but the other country in my case is different)
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ray.james
Posts: 1652
Joined: Tue Jul 19, 2011 4:08 am

Re: US tax on foreign rental income

Post by ray.james »

You are doing it correctly.

Do note USA allows depreciation which is different from any Asian tax systems. In Singapore you will get flat deduction on rental income. From my experience most Asian countries have some form of flat deduction for rental income instead of exact expensing+ depreciation. This can reduce your USA taxes further.
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939
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