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I'm moving to the UK for a temporary job transfer and will be renting out my home in California. Since my home will become an income property, I can no longer claim the mortgage interest rate deduction, but I am able to deduct the depreciation of my home.

I will continue to file US & California returns, but since the US and the UK have a tax treaty in place, my understanding is the I will not be double taxed.

Does someone know if I will be able to claim the property depreciation tax deduction from the IRS while I'm away with minimal income earned in the US?

  • This is not definitive and therefore a comment instead of answer. Based on my personal experience, the applicability will be based on whether your overseas income passes the income threshold for an overseas citizen. You may be double taxed if your income is over that threshold at which point I would have those deductions ready. – Aias Dec 12 '16 at 19:20
  • In my experience, yes, though I didn't have to deal with renting my house. In fact, you may be able to take other deductions such as foreign tax credit, and per-diem expense allowance, depending on your particular situation. – jamesqf Feb 6 '17 at 1:03
  • " I can no longer claim the mortgage interest rate deduction" Why not? I have 5 rentals. Some I lived in and some not... I wouldn't be able to afford any of them if this were true. – maplemale Feb 6 '17 at 22:46
  • Generally, US tax treaties aren't so good at protecting against double tax. The US foreign tax credit splits up your income into multiple categories and insures that you pay the higher rate between the two countries in EACH category. In practice, this means that you can pay strictly more total tax than you would in either country alone. Furthermore, you can get caught when two different tax systems don't agree on definitions of things and on what is taxable, and when the US or Foreign system gets angry that you don't have the proper tax reporting forms (like 1099s) for their country. – B Chin Apr 7 '17 at 17:54
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You can certainly claim mortgage interest as an expense on your rental property. You can also claim depreciation. Being a foreign national may complicate other parts of your return, but your worksheet for calculating the income from the rental is not affected by your residency.

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