Can I deduct mortgage interest paid to a foreign bank for a property overseas?

Unfortunately, you won't be able to deduct the mortgage interest in your situation. For mortgage interest to be deductible, the property must qualify as your primary residence or second home. Since you're renting in the US and only occasionally visiting the foreign property, it doesn't meet the IRS requirements for either classification. Additionally, to qualify as a second home for mortgage interest deduction purposes, you generally need to use the property for personal purposes for the greater of 14 days or 10% of the days it would normally be rented. Since you mentioned only visiting occasionally, it's unlikely to meet this threshold. The mortgage interest deduction is specifically designed for US taxpayers' primary residences or qualified second homes, not investment or occasional-use properties located abroad.

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Everyone seems to be overlooking something important here - foreign tax credits! If you're paying property taxes on that foreign apartment, you might be eligible for foreign tax credits even if you can't deduct the mortgage interest. I own a place in Canada and while I couldn't deduct the mortgage interest, I was able to claim the property taxes I paid as part of my foreign tax credit calculation on Form 1116. Saved me about $800 last year!

Has anyone considered that this might qualify as a qualified residence? IRS Publication 936 says that a qualified home includes "a house, condominium, cooperative, mobile home, house trailer, or boat that has sleeping, cooking, and toilet facilities." It doesn't specifically exclude foreign properties! You just need to live in it for at least 14 days per year OR 10% of the days it's rented out (which would be 0 in your case so the 14 days would apply).

Based on what you've described, unfortunately the mortgage interest won't be deductible. The key issue is that for foreign property to qualify for mortgage interest deduction, it needs to meet the same requirements as domestic property - either be your main home or a qualified second home that you use personally for at least 14 days per year. Since you're renting in the US (so this isn't your main home) and only visiting the foreign property "a few times a year," it's unlikely you're hitting that 14-day threshold. The fact that your parents might live there part-time doesn't count toward your personal use days. However, don't overlook other potential tax implications! Make sure you're properly reporting the foreign property on Form 8938 if it meets the reporting thresholds. Also, if you ever decide to rent it out in the future, that would open up different deduction possibilities (though it would also create rental income reporting requirements). Consider consulting with a tax professional who specializes in international tax matters, especially given the complexity of foreign property ownership and varying interpretations of the rules.