Giantaxe

You can deduct $25k of rental losses against regular income, but that starts to be phased out if your income is over $100k. At least that was the case for tax years up to and including 2017; no idea whether the recent tax changes altered that.

The Moose

So, coming full circle, I can't elect not to depreciate the property?

Pulaski

Correct.

mrken30

There was talk of changing the depreciation term for foreign property from 40 years to 25, I am not sure if that went into the new legislation. That only applies to new purchases , I would think. You are best consulting with a CPA.

Depreciation can lower you tax bill, and if you play it right, you will never have to pay tax on the appreciation using 1031 exchanges and inheritance reset.

The property does not really depreciate. One of my US houses has doubled in value and I still depreciate the building 2/55 ths per year.

The Moose

Sounds like I need a better CPA!!

Giantaxe

Assuming the OP wishes to own this or a "like kind" investment property for the rest of their life... or go through some contortions to convert the property into a primary residence.

hfrix

I'd like to jump in and ask a question regarding the deductions allowed on UK rental income:
If the total expenses is higher than income, can I reduce this from my total income (i.e. salary earned from US employment)? Note; my total US income for 2018 was less than $100k as I moved halfway through the year.
Another question if I may; is the total rental income added in line 19 in the section related to income effectively connected with US trade, despite this being foreign income?
Cheers!

mrken30

At Federal level this is true, but there are some limits. At State level, this may or may not be true, depends on the State.

Mettski

this may help with the 1st part: https://www.nolo.com/legal-encyclope...al-losses.html

mrken30

The answer is yes but there are limitations. I would suggest looking for CPA that knows how to manage foreign rentals. If you want to use software, turbo tax premier can handle overseas properties. Are you sure you're making a loss? Will it ever make a profit? I assume you know the difference between expenses and improvement. Also did you live in the property for more than 14 days?

hfrix

Yes I most certainly made a loss given the depreciation and mortgage interest expense.

Another follow on question: the depreciation of te building is over 40 years. How about appliances? Is is 20 years or also 40?

Thank you all!

Pulaski

5 years.

hfrix

Pulaski

40 years is for foreign real estate (your CPA is correct), 5 years is for appliances.

hfrix

Ok, he insists 40 years applies to the appliances in the property as well...