How Has the New U.S. Tax Law Affected Deductions for Foreign Property Ownership?
The legislation enacted this year severely restricts what you can write off
For Mansion Global's weekly Tax Talk question, Partner Mark Stone answered how the new Tax Cuts and Jobs Act affects capital gains and tax deductions for foreign property ownership. According to Mr. Stone, annual property taxes on overseas property are no longer deductible. These changes will be in effect for the period between Dec. 31, 2017 and Jan. 1, 2026. Alongside this, capital gains taxes that might arise in a foreign country from the sale of a home might be subject to a limit, and since that amount may already be met from state income taxes alone, there would be no additional foreign deductions available.
Nevertheless, the new law did not change the ability of a U.S. person to claim a foreign tax credit for capital gains taxes paid to a foreign country. Thus, Mr. Stone adds that “claiming a tax credit requires analysis by a tax professional" because, if available, the foreign tax credit is generally worth more than any comparable deductible.