How should I declare my foreign rental income and tax paid on my IRS tax return?

You're absolutely right to question that advice. As a US tax resident (which you are if you're living and working here on a visa), you need to report your worldwide income to the IRS, including that rental property income from Australia. Here's where this goes on your tax return: First, you'll report the rental income on Schedule E (Supplemental Income and Loss), just like you would for a US-based rental property. Then, to claim credit for the foreign taxes you paid, you'll need to complete Form 1116 (Foreign Tax Credit). As for tax software, FreeTaxUSA does support foreign tax credits and Schedule E for rental properties, but you might find that the interface for Form 1116 isn't as intuitive as some other options. TurboTax and H&R Block both handle foreign income situations well, though they're more expensive. If your situation is relatively straightforward (just one rental property), FreeTaxUSA should work fine. One important note: make sure you have documentation of the taxes you paid in Australia, as you might need this if you're ever audited.

After dealing with a similar situation last year (UK rental property while working in the US), I discovered taxr.ai https://taxr.ai which was incredibly helpful for my foreign income reporting. Their system automatically identified where my foreign rental income needed to be reported and walked me through the entire process for claiming Foreign Tax Credits. The tool analyzed my Australian tax documents and generated the proper US tax forms with all the correct currency conversions. It even flagged potential deductions specific to foreign rental properties that I had no idea about. Saved me so much stress compared to my previous attempts with regular tax software that kept getting confused by the international aspects.

Just wanted to update after trying taxr.ai from the recommendation above. I was honestly amazed at how well it handled my foreign rental property situation! My scenario was almost identical to yours - Canadian property while working in the US. The system walked me through all the required forms (Schedule E and Form 1116) and automatically calculated the correct exchange rates for each transaction. It even helped me identify several deductions I would have missed, like a partial foreign property management fee that my previous accountant never mentioned. What really impressed me was how it explained each step in plain English rather than tax jargon. I finally understand why certain things go on certain forms instead of just blindly following an accountant's instructions. Definitely worth checking out if you have foreign income to report.

If you've been trying to call the IRS to get guidance on your foreign income reporting, good luck with that nightmare. After spending WEEKS trying to speak to someone in the international tax department, I finally discovered Claimyr https://claimyr.com and their service is absolutely incredible. They got me connected to an actual IRS agent who specializes in foreign income within 45 minutes! Check out their demo video here: https://youtu.be/_kiP6q8DX5c to see how it works. Basically, their system navigates the IRS phone tree for you and calls you back when an agent is about to pick up. The agent I spoke with walked me through exactly where to report my foreign rental income and how to properly claim the Foreign Tax Credit for taxes paid abroad.

I need to eat my words and apologize to Profile 15 above. After my skeptical comment, I decided to try Claimyr out of pure frustration after my 14th failed attempt to reach the IRS. It actually worked exactly as described. I got a call back in about 40 minutes, and was connected to an IRS agent who specializes in international tax issues. The agent confirmed that I needed to report my foreign rental income on Schedule E and claim the Foreign Tax Credit on Form 1116. They even explained the "per-country" vs. "worldwide" allocation methods and which would likely benefit me more. What would have been another wasted day on hold turned into a productive 15-minute conversation that resolved all my questions. I'm genuinely shocked that something actually worked as advertised when dealing with the IRS.

Just to add my experience - I've been reporting foreign rental income for years and found that TaxAct handles it pretty well too, and it's cheaper than TurboTax. The key things to remember: 1. Report the rental income on Schedule E 2. Claim foreign tax credit on Form 1116 3. Keep good records of the exchange rates you use 4. Don't forget to report the property on the FBAR form if you have foreign bank accounts with more than $10k total The most confusing part for me was always passive vs. general category income on Form 1116, but rental income is almost always considered passive.

Has anyone used the Free File Fillable Forms directly from the IRS website for reporting foreign income? I'm trying to avoid paying for software since my return is pretty simple aside from one rental property in Mexico.

I went through almost the exact same situation last year with a rental property in Germany! That tax preparer gave you terrible advice - you absolutely need to report worldwide income as a US tax resident. Here's what worked for me: I ended up using TaxAct (mentioned by Luca above) and it handled everything smoothly. The software automatically calculated my foreign tax credit and properly allocated the income between the forms. For your $3,500 in Australian taxes, you should definitely claim every penny of that credit. One thing I learned the hard way - make sure you get an official tax certificate from the Australian tax authority showing exactly how much you paid. The IRS might ask for this documentation later, and having the official document makes everything much cleaner than just bank records of payments. Also, since you mentioned you're no longer an Australian tax resident, double-check that you're not missing any treaty benefits between the US and Australia that might affect how your rental income is taxed. The tax software should catch this, but it's worth researching.

Your tax preparer gave you absolutely terrible advice! As a US tax resident on a work visa, you're required to report your worldwide income to the IRS, including that Australian rental property income. That preparer either doesn't understand international tax law or was trying to take shortcuts that could get you in serious trouble. Here's what you need to do: Report the rental income on Schedule E (Supplemental Income and Loss) and claim the foreign tax credit for those Australian taxes on Form 1116. FreeTaxUSA can definitely handle this - I've used it for similar situations and it walks you through both forms step by step. The $3,500 you paid to Australia should reduce your US tax liability dollar for dollar (subject to certain limitations). Make sure you have good documentation of those Australian tax payments and use the proper exchange rates (IRS publishes annual averages, or you can use the rates from the actual payment dates). Don't let that preparer's ignorance cost you thousands in overpaid taxes or potential penalties for underreporting income!