# Overseas Income Tax Question



## ahmedmo (Oct 17, 2014)

Hi, I have a question regarding income earned from rent of overseas property. I am an overseas tax payer and I would like to purchase a property. the property will be in my name. however since according to US law all properties are shared 50/50 between husband an wife, how should we file this rental income and how much is the exclusion limit which has to bee considered.


----------



## DavidMcKeegan (Aug 27, 2012)

Hello!

With regards to your message, unfortunately there is no exclusion limit on rental income. The exception to this would be if owning and renting properties is your only job, in that case you can use the income exclusion (although you would likely still be liable for Self Employment taxes).

As far as reporting the income from the property, if you are the sole owner you must report 100% of the income from the property. If you own it jointly with your spouse, you can report 50% of the income.

I hope this helps!


----------



## Bevdeforges (Nov 16, 2007)

Just to clarify, it's not the case that all properties owned by a husband and wife are split 50/50. It can very much depend on the state in which you were married or resident in the US and/or on any existing agreements or legal documents covering the purchase of the property (especially the type of ownership you established when you purchased the property).

There is also the issue of whether both or you or only one of you is subject to US taxation and your filing status (married filing separately or married filing jointly).
Cheers,
Bev


----------



## BBCWatcher (Dec 28, 2012)

There are also potential future income taxes on the full capital gains (net of costs) when your U.S. real estate is sold.

Forgive the simple question, but what are you hoping to achieve in purchasing a rental income property in the United States? If you're simply interested in real estate for investment purposes, another very simple and straightforward option is to invest in U.S. REITs (Real Estate Investment Trusts). Vanguard's REIT ETF would be an excellent, low cost example of that type of investment, and it trades on the New York Stock Exchange under the symbol VNQ.

You have the possibility of including some of your U.S. REIT holdings in U.S. tax-advantaged retirement and/or education savings accounts if you're qualified to make contributions to such accounts and can follow their rules, but even without such advantages you're certainly no worse off from a tax point of view than direct holding of a single property. You have no insurance expenses, no management responsibilities, no property tax payments to make, no delinquent rent collection issues.... Exchange-traded REITs are just like buying shares of stock in Apple or Ford or AT&T, and then somebody else (a management company) does all the hard work to buy, manage, and sell the actual properties, returning profits to the REIT shareholders.

Some people would say, "Well, I have special knowledge, and I know that _this_ property is going to be a better investment." OK, let's assume you do, that you know what type of property will do well. Fortunately there are lots of publicly traded _specialty_ REITs in the United States. For example, if you think farmland is going to increase in value, and you want to invest specifically in farmland, yes, you could buy farmland and rent it out (and manage it -- or hire somebody to manage it, insure it, pay property taxes on it yourself, etc.) Or...you could go to the NASDAQ exchange and buy symbol LAND or buy symbol FPI on the New York Stock Exchange. LAND and FPI are REITs that only invest in farmland, so that's another way to bet on farmland besides directly buying farmland.

Anyway, I am not necessarily recommending investing in either direct real estate holdings or REITs, but I did want to point out that the U.S. has many excellent vehicles (REITs) for investing in real estate besides direct holding. You can also invest in home _building_ companies if you think they will do better in the future than the stock market currently expects them to do.


----------

