# Tax implications



## Lalalandaustralia22 (5 mo ago)

Hi all
Just a question regarding us taxes:
I’m a us citizen with pr in Australia.
I own 1 house with my Australian partner in Australia, which I am aware that I need to report on us taxes. Besides the house that we jointly own, my partner owns 2 houses, also in Australia. We recently just remortgaged due to the soaring interest rates and I am now on the mortgage for all 3 houses ( I needed to be for refinance purposes ) but I am only on the deed for the house we jointly own. My partner is still the sole owner of the other 2 properties, my name is just on the mortgage but not the deed for them. When tax time comes around for the us, I still only need to report the rental income for the 1 house that I own, correct? Since my name isn’t on the deed for the other 2 and they are being rented out, I assume I can leave them off the us taxes. Tia


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## Moulard (Feb 3, 2017)

I will set aside for a moment that I did not think that Banks in Australia would allow someone to place a mortgage on a home if they were not also on the title. If you are not on the title, then in terms of your share of the liability there no asset the mortgage is secured against. 

If I understand correctly all three homes are rented. 

I am going to assume for this that you and your partner have not elected to treat him as a US person (if you are married that is), and thus you are filing as either Single or Married Filing Separately.

For rental income this is my take...

You would report the rental income of the house that you own
You would not report the rental income that your partner owns unless you have an agreement between the two of you that means you derive some share of the rental income
You would claim foreign tax credit (passive category) on your US tax return for that portion of your Australian tax liability that is related to this rental income


The other half of the equation (Phantom Currency Gains) is far more problematic for US taxpayers and you may wish to stop reading now.

Technically under US law every loan repayment, including the closure of your original loan when you remortgaged is a potentially taxable foreign currency transaction. As the functional currency for your US taxes is the US Dollar.. and thus the difference in the value in USD of the amount you borrowed vs what you paid back when you remortgaged is treated by the fine folks at the IRS as income. Compare the exchange rate on the date of original settlement vs that when the remortgage settled and determine whether you have paid back more or less that you borrowed in USD when you repaid the balance of the original loan.

If you signed the loan application and are on the mortgage, then I suspect you have borrowed the money then you will have to calculate any gains or losses in USD on that portion of the loan you have repaid across all three of the properties. On each loan repayment you would have to determine the portion of the principal that is repaid and calculate the value of that amount in USD at the time the funds were released, and the value of that amount on the day of the repayment. If the gain is more than $200 USD then it is technically taxable income.

If you "made" a gain, its reportable as income, if you "made" a loss it is not deductible because the rules are entirely stacked against you.

I say technically because that is what the US tax law requires not because this is what I am advising you to do.


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