From a tax standpoint, buying and selling foreign real estate (a primary residence in one’s name) is not much different than in the United States. At the present time, there are no reporting requirements when purchasing foreign real estate. However, if one transfers money to a foreign bank in order to facilitate a real estate transaction, then this action would likely trigger a requirement to file an FBAR.

Photo by: Mark Moz

Foreign Real Estate (Primary Residence)

Property taxes are deductible on your tax return. So are mortgage interest payments, including home equity loans. The same restrictions apply as in the US (e.g., acquisition debt limited to $1M, home equity debt limited to $100,000). One can deduct mortgage interest on up to two homes. Keep in mind that deductible amounts paid in local currency will need to be converted to USD for tax reporting purposes.

When it comes to selling foreign real estate, the tax-related similarities continue. If the home has been one’s primary residence for at least 2 out of the past 5 years, then one can exclude capital gains up to $250,000 ($500,000 if married filing jointly). Similar to the real estate deductions, amounts denominated in local currency will need to be converted to USD.

From a non-tax standpoint, there are a number of issues to consider. Property rights differ by country. Transferring money should be conducted carefully – fees and low FX can be costly. It may be wise to seek professional guidance (e.g., a reputable real estate broker).

For general information on US expat taxation, please read: US Taxes for Americans Living Abroad – Ultimate Guide.