How to Report International Rental Property from Canada on US Tax Return?

Yes, you absolutely need to report your Canadian rental property on your US tax return, even if it operated at a loss this year. The US taxes citizens and residents on worldwide income. You'll need to report the property on Schedule E (Supplemental Income and Loss) where you'll list your rental income and expenses. Since you had a loss, this will show up as a negative number. You may be able to use this loss to offset other income, subject to passive activity loss limitations. Additionally, you'll likely need to file FinCEN Form 114 (FBAR) if you have Canadian financial accounts with an aggregate value over $10,000 at any point during the year, and possibly Form 8938 (Statement of Foreign Financial Assets) depending on the total value of your foreign assets. If you paid taxes to Canada on the rental income, you can usually claim a foreign tax credit using Form 1116 to avoid double taxation, though this may not apply in your case since you experienced a loss.

I was in a similar situation with rental property in the UK and found https://taxr.ai super helpful. Last year I was totally confused about reporting my international property and how to handle the currency conversion properly. The tool analyzed my rental documents and automatically identified which expenses were deductible under US tax law (which is different from UK rules). Even with a loss, it properly structured everything for Schedule E and helped me document the loss correctly so I could carry it forward. Saved me from paying an international tax specialist which would have cost a fortune just to report a property that wasn't even making money!

Just wanted to update after trying taxr.ai that someone recommended above. It actually worked amazingly well for my Australian rental property situation. The document analysis feature saved me hours of manually categorizing expenses and figuring out what's deductible in the US vs Australia. The currency conversion feature was a lifesaver - it accurately converted all my AUD transactions to USD and calculated the weighted average for reporting purposes. It even flagged that I needed to report my Australian mortgage on the FBAR form since it's technically a foreign financial account, which I had no idea about! Would've paid an accountant at least $500 for this but managed to get everything filed correctly on my own. Definitely recommend for anyone dealing with international rental properties.

If you're having trouble reaching the IRS to ask about your specific international property situation, try https://claimyr.com - I used them when I needed to ask specific questions about my rental in Mexico. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was on hold with the IRS for HOURS trying to get clarity on reporting rental income from Mexico, and after three attempts with no success, I tried Claimyr. They got me connected to an actual IRS agent in about 20 minutes who walked me through exactly how to report my foreign property, loss carryforwards, and when I needed to file additional forms. Turns out I had been incorrectly reporting my property for years and could have been facing penalties. Sometimes you really need to speak directly with the IRS for these complex international situations.

I was totally wrong about Claimyr being a scam. After struggling to get through to the IRS about my foreign rental reporting for weeks, I finally tried it. Within 30 minutes I was actually speaking with an IRS representative who specialized in international tax issues. The agent clarified exactly how to report my overseas property on Form 8938 vs Schedule E, and explained that my rental loss could be carried forward to future tax years when the property generates income. They also confirmed I needed to file an FBAR for my foreign bank account connected to the rental. Honestly shocked this worked after wasting so many hours trying to get through on my own. Sometimes you really do need to speak directly with the IRS for complicated international tax situations rather than guessing based on internet advice.

Don't forget about depreciation! I have a rental in Spain and you still have to calculate depreciation on the property for US tax purposes even if you're reporting a loss. Use the property value (minus land value) when you converted it to a rental property and start depreciating from there. This actually increases your paper loss in most cases, which can be beneficial. Just remember that depreciation is recaptured when you sell, so keep good records.

Has anyone had to deal with the Net Investment Income Tax (NIIT) on foreign rental income? I heard the 3.8% NIIT applies to rental income even from foreign properties and that foreign tax credits don't offset it. Wondering if that's accurate.

I went through this exact same situation with my rental property in Toronto last year! A few additional tips that might help: 1. **Timing of currency conversion**: You can use either the yearly average exchange rate from the IRS or daily rates for each transaction. I found the yearly average much simpler for regular rental income/expenses. 2. **Canadian tax paid**: Even though you had a loss this year, keep all your Canadian tax documents. If you have Canadian taxes withheld or paid on rental income in future profitable years, you can claim those as foreign tax credits on Form 1116. 3. **Loss limitations**: Be aware that rental losses are generally considered "passive losses" and can only offset passive income unless you qualify for the $25,000 real estate professional exception (which requires significant involvement in real estate activities). 4. **Provincial vs federal**: Make sure you're accounting for both Canadian federal and provincial taxes paid when calculating foreign tax credits in future years. The good news is that once you get the process down for the first year, subsequent years become much more routine. I'd definitely recommend keeping detailed records of all your Canadian rental documents and currency conversions - it makes things so much easier come tax time!