Taxes on Foreign Rental Income as H1B Resident Alien - Confirmation Needed

You've got the basic idea right, but there are a few important things to consider as an H1B holder with foreign rental property. Yes, as a resident alien, you're taxed on worldwide income just like US citizens. Your calculations show a paper loss, which is correct - the depreciation plus mortgage interest would exceed your rental income, creating a passive activity loss. However, there are two big considerations: First, passive activity loss rules might limit your ability to use these losses against other income types. These losses may only offset other passive income unless you actively participate in property management and meet income requirements. Second, don't forget about foreign tax obligations. You'll likely pay tax in your home country on this rental income, though you can claim Foreign Tax Credits in the US to avoid double taxation. One more thing - make sure you're reporting your foreign financial accounts if they exceed $10,000 at any point (FBAR requirements).

After struggling with a similar situation last year, I found this amazing tool called taxr.ai (https://taxr.ai) that specifically helped me figure out my foreign rental property situation. I'm on an L1 visa but the tax rules are basically the same as your H1B situation. The tool analyzed my foreign rental docs and highlighted deductions I was missing - especially around how to properly calculate depreciation on foreign property and how to claim foreign tax credits correctly. It saved me from making expensive mistakes about passive activity loss limitations. Their analysis also showed me how to properly document everything for the IRS since foreign rental properties get extra scrutiny. Seriously worth checking out before you file.

I tried taxr.ai after seeing it mentioned here and I'm genuinely impressed. My situation with rental property in Singapore was incredibly complicated due to the different property classification systems and tax treaties. The system actually recognized the Singapore property type and automatically applied the correct depreciation rules while also showing me how to properly report it on US taxes. The foreign tax credit calculation alone saved me more than I expected - it properly accounted for Singapore's property tax system and showed me exactly how to claim those credits against my US tax obligation. I was going to pay an international tax specialist $1,000+ but the tool handled everything I needed. The documentation it provided would be super helpful if you ever get audited too.

If you end up owing taxes or need clarification from the IRS about your rental situation, good luck getting through to them on the phone. After trying for weeks to reach someone about my foreign rental property questions, I used https://claimyr.com and got through to an IRS agent in under 45 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I had specific questions about reporting my foreign property management fees and whether certain expenses were deductible. The IRS website was useless for my specific situation, and I kept getting conflicting advice online. Getting to actually speak with someone who could look at my specific case made all the difference. They call the IRS and navigate the phone tree for you, then call you when they have an agent on the line. Saved me hours of frustration and hold music.

I need to eat my words. After posting my skeptical comment, I tried Claimyr out of desperation because I had a deadline approaching for clarification on my foreign rental property taxes. I got connected to an actual IRS international taxation specialist in 35 minutes after trying for literally weeks on my own. The IRS agent cleared up my confusion about how to handle currency conversion for my foreign property expenses and confirmed I was calculating my passive activity loss correctly. She also explained exactly which forms I needed since I have foreign bank accounts for collecting rent. That 15-minute conversation saved me from making several major mistakes on my return. Still can't believe it actually worked when I'd wasted countless hours trying to get through on my own.

Something important no one mentioned: the 30-year depreciation period you're using might be incorrect. For residential rental properties placed in service after 1986, the US depreciation period is 27.5 years, not 30 years. Unless there are different rules for foreign properties that I'm unaware of? This would change your depreciation from $56k to about $61k per year, making your paper loss even larger.

Don't forget about Form 8938 (Statement of Foreign Financial Assets) if your foreign financial accounts exceed certain thresholds! Made this mistake my first year with overseas rental property and got a nasty letter from the IRS.

One thing I haven't seen mentioned yet is the potential impact of tax treaties between the US and your home country. Many countries have tax treaties with the US that can affect how rental income is taxed and may provide additional benefits beyond just foreign tax credits. For example, some treaties allow you to elect to be taxed on rental income on a net basis (after deductions) rather than gross basis, which can be more favorable. Others might have specific provisions about depreciation calculations or timing differences. Also, keep in mind that if you're planning to sell the property eventually, you'll need to consider depreciation recapture rules. All that depreciation you're claiming now will be "recaptured" as ordinary income (up to 25% tax rate) when you sell, even if the sale itself qualifies for capital gains treatment. Given the complexity with foreign rental properties, passive activity rules, currency conversions, and multiple filing requirements, I'd strongly recommend consulting with a tax professional who specializes in international taxation before making the purchase. The upfront cost could save you significant headaches and potential penalties down the road.