Trump Tax Plan Changes for Foreign Real Estate Investments
The new tax law this year severely restricts your foreign property write-offs.
Mansion Global has recently reported that renting out a foreign property for more than 2 weeks a year means that owners of foreign property will not be eligible for a tax deduction under the new tax law. One of the main changes is about foreign real estate taxes paid.
Under the new law, the following changes are key for tax planning starting 2018:
- Property taxes on foreign property are not deductions anymore, from Dec. 31, 2017 to Jan. 1, 2026.
- Tax deductions from your income taxes are now capped at $10,000 (for married couples), in total.
- That $10,000 includes all state taxes, all local taxes and limit applies to capital gains and income taxes in the foreign country.
- Add state, local and foreign taxes together to stay under the limit.
- The new law still lets you claim your capital gains taxes as foreign tax credits instead of deductions.
- If you can get a foreign tax credit it can be worth more than deductions. It requires professional analysis by an accountant.
- Local transfer taxes when you purchase and sell real estate is not affected by the new law.
- Tax credits on your US income taxes for amounts paid to foreign countries are not changed.
If you are paying taxes on an income-producing foreign property outside the country, and you pay US taxes, it is time to have your situation reassessed by a professional to see how the new tax law affects you talk to us, we will help you find the answers that apply to you.
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