Originally Posted by Pulaski

So you're talking about cash flow, not profit, right?

Originally Posted by Pulaski

That seems like a lot of tax unless you had very little mortgage interest (small mortgage or a very low interest rate), and/or had a remarkably high rent on a low value property (building) ..... Or you weren't deducting depreciation.

If you can't show a tax loss on rental property, you need a better tax accountant!

Originally Posted by H Bomb

Yeah - cash flow. But it doesn't become profit til we sell - so cashflow is what matters to us at the moment.

Originally Posted by fidobsa

I looked this up today and the threshold is £2500, above which you have to register as a non resident landlord.

Originally Posted by Pulaski

You have taxable profits after deducting mortgage interest, insurance, repairs and maintenance, management fees, and depreciation on the building (2.5%) and appliances (20%)?

Originally Posted by Pulaski

You assume incorrectly, but you are partially correct. You must report your rental income on your US tax return, but you can deduct any expenses you incur, including mortgage interest, insurance, repairs and maintenance, management fees, advertizing/marketing, property taxes (if any), and depreciation - which is mandatory.

Depreciation is calculated as 1/40 of the value of the building each year. If you don't know the value of the building as distinct from the value of the land, 80% of the purchase price of building+land is a good place to start. Depreciation is also deducted for appliances at 20%/yr.

By the time you have deducted mortgage interest, depreciation, management fees, repairs and maintenance, etc. I doubt you will have any profit left to tax!

Originally Posted by barua

OK. My calcs as below: (Per annum)
Rental income: £10000
Mortgage Interest : £1000 (Yes low mortgage)
Insurance: £300 ish...
Depreciation(building): £4300
Repairs and Maintenance : £1000 (estimate)
No other costs as it will be under guaranteed rent scheme.

So profits around: £4400

1) Will file UK tax returns but don't have to pay tax as under personal allowance.
2) Will register as non resident landlord in UK.
3) will file this as profit in US under joint filing.
So I guess this is the amount that is taxable. Do i just have to pay Federal tax or both Federal and State on this overseas rental income?

Originally Posted by mrken30

The depreciation is not subject to deductible when calculating US income tax and in practice it is not a loss is a loss for tax purposes but will likely (assuming the house is sold at a profit) be recouped through CGT when the property is sold. .....

Originally Posted by mrken30

Remember to deduct the depreciation amount when calculation the cost base value. So you could end up paying CGT even if you sell at a loss. .....

Originally Posted by Pulaski

After 40 years* of depreciation 100% of the sales proceeds of a property outside the US is subject to CGT.

* It's 27½ years for a property in the US

Originally Posted by mrken30

100% minus the land value. You can only depreciate the building value plus improvements. If you have made a lot of improvements it may be more than 100%