# Taxes and Property Service Charge



## PalmJB (Mar 9, 2015)

Regarding American Tax return: Are the "Annual Service Charges" homeowners pay every year to the developer in Dubai (Nakheel or Emaar for example) deductible on the US Tax return?

Thanks
JB


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## Bevdeforges (Nov 16, 2007)

Depends on the nature of the charges, but I suspect it is far more likely you might be able to include them in the Foreign Housing Deduction calculation than to deduct them as an itemized expense. But perhaps we can flag down someone with a bit more experience in this area.
Cheers,
Bev


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## BBCWatcher (Dec 28, 2012)

I agree with Bev. They're not taxes (they're paid to the developer/housing manager), so they wouldn't be eligible for itemized deduction (IRS Form 1040 Schedule A). But they should be partially or fully allowable expenses within the Foreign Housing Exclusion (or Deduction), i.e. IRS Form 2555. Probably partially. To the extent they pay for maids and gardeners, not allowed. To the extent they pay for community area rental and maintenance (parking spaces, hallways, etc.), allowable. Interesting question!

As an aside, for future reference, the Foreign Housing Exclusion/Deduction really kicks in when you _rent_, not when you buy. If you live in a comparatively low tax jurisdiction (such as Dubai), and if your earned income is fairly high or better (non-trivially greater than about $100K per year), and if your rental and other allowable housing expenses would be something fairly substantially more than $15K per year, then renting v. buying becomes a real question in terms of tax benefits. Otherwise, it doesn't matter much. A lot of people automatically think buying is "better" than renting. No, not actually. You have to sit down and run the calculations, and one of those calculations is that if you were getting some U.S. tax benefit from the Foreign Housing Exclusion (or Deduction) you'll likely lose almost all of that particular tax benefit if you buy a home.


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