US Taxes and Overseas Income

[up_guy]

Do we have to declare overseas income in US taxes while we are on h-1B visa or EAD ? Overseas income could be rental income or real estate capital gain etc ?

Do we get any tax break for mortgage payments done outside US ?

[gcdreamer05]

Do we have to declare overseas income in US taxes while we are on h-1B visa or EAD ? Overseas income could be rental income or real estate capital gain etc ?

Do we get any tax break for mortgage payments done outside US ?

I know the answer for second ques, yes you can get benefits for mortgage payments done outside US, talk to your tax rep, i usually go to hnr block and they know how to handle it. Any tax person should know too, as it is very common for folks to show the mortgage payments overseas.

[piyu7444]

I know the answer for second ques, yes you can get benefits for mortgage payments done outside US, talk to your tax rep, i usually go to hnr block and they know how to handle it. Any tax person should know too, as it is very common for folks to show the mortgage payments overseas.

I have tax guy who was from Bangladesh and then I moved to an Indian guy who did taxes for me this year. Both of them told me that I can not benefit by the fact that I am making payments in India for a property I bought............so I would think that the above statement is incorrect.

Gcdreamer05- Can you please tell us what rule/guideline IRS has where we can take advantage of home loan in India? If there is something like that a lot of people will get the advantage.

[gcdreamer05]

Please go and talk to a tax consultant,

i can provide you 2 links which explain how this can be possible,

http://answers.yahoo.com/question/index?qid=20080304001650AA5nr1v
If the loan is secured by the overseas property you can deduct the interest


http://www.free-press-release.com/news/200903/1237184118.html
And look at the above article, which is another way for you to do it.

One best suggestion i can give to you is, most popular tax websites on their website show you the tax professional background, so you can search for someone who has very good experience and knowledge in the area you are looking for, like for example let me explain my scenario.

I had to do ITIN for my wife, so i went to a tax filing company which was like 0.5 miles near to my home, i enter and inside no one there knew anything about ITIN, the lady would go in to the computer and file the tax and she says provide me ITIN number, i am saying i dont have one , i need to apply then she tries and tries and says computer does not allow me to file a new ITIN application, so i am like freakin fedup, then i go to their website and search for a tax professional who specialized in ITIN and found a guy with 20 yrs experiences and who knows this stuff and he is like 10 miles away from my home, but still went to him, and he knew everything, he applied for a new application for ITIN and attached it to my application.

So the moral of this story is "Go to folks who know and who have knowledge" - so look for someone in Tax , who has experience with overseas mortgage and then you need not worry."

[gcdreamer05]

I have tax guy who was from Bangladesh and then I moved to an Indian guy who did taxes for me this year. Both of them told me that I can not benefit by the fact that I am making payments in India for a property I bought............so I would think that the above statement is incorrect.

Gcdreamer05- Can you please tell us what rule/guideline IRS has where we can take advantage of home loan in India? If there is something like that a lot of people will get the advantage.

piyu it is defintely possible, i am not a CPA and hence do not know what rule/guideline but i can give you links to say it is possible,

look at this
http://www.taxinfoblog.com/2008/06/itemized-deduct.html

and look at this
http://www.taxalmanac.org/index.php/Discussion:Foreign_mortgage_interest_deduction

You need to be very careful as it will trigger IRS audit so you need to make sure you consult a very good tax consultant and have all the required docs ready for you to do it.

But it is defintely possible if you play by rules. Consult an experienced Tax consultant.

[sainwa]

Yes,
By law it strictly mentions that you have to report all your foreign income when you are filing 1040 (resident), unless you are filing 1040 NR.
Its a punishable act to hide your foreign income when filing 1040 EZ.

Also as a resident you are required by law to report all your foreign ban accounts and the amounts in it.

http://www.irs.gov/pub/irs-pdf/f90221.pdf

Its punishable offence for 5 years, if you do not report it.

Do not play with the law in US, Its a country of law and no matters who you are they will catch it when they want.

my 2 cents...

they say that one can get away after a murder in US *, but can never get away with all the taxes in US you are supposed to report.

* under certain conditions .

[masterji]

The form says 'No report is required if the aggregate value of the accounts
did not exceed $10,000'

Yes,
By law it strictly mentions that you have to report all your foreign income when you are filing 1040 (resident), unless you are filing 1040 NR.
Its a punishable act to hide your foreign income when filing 1040 EZ.

Also as a resident you are required by law to report all your foreign ban accounts and the amounts in it.

http://www.irs.gov/pub/irs-pdf/f90221.pdf

Its punishable offence for 5 years, if you do not report it.

Do not play with the law in US, Its a country of law and no matters who you are they will catch it when they want.

my 2 cents...

they say that one can get away after a murder in US *, but can never get away with all the taxes in US you are supposed to report.

* under certain conditions .

[bhobama]

Yes, no form filing required if the total is less than $10,000. However, if you have 3 accounts with $4000, $3000, $3000 currency equivalent then you have to file.

Also regardless of the amount, if there is taxable income that is not taxed by your home country, then you have to include it in form 1040 schedule B or D. This is because H1B (who have been here > 180 days in a year), GC, and Citizens are considered US persons. Therefore they are taxed on worldwide income. See this for more info (applies to 2008 also) http://www.irs.gov/pub/irs-pdf/p519.pdf

I know many friends from India who are not even aware of this, and think that all overseas income is tax free, so they keep sending money there to avoid tax.

Also heard from a friend that an Indian guy had offshore accounts and IRS somehow found out about transactions with the bank. In his tax return, he selected NO for the question "Do you have a foreign account ?" IRS charged him with perjury. Lately, they have become more aggressive in enforcement on this issue.

http://64.27.92.54/webfiles/FBAR_filing_requirement.pdf

http://articles.lancasteronline.com/local/4/235904

[gapala]

Please go and talk to a tax consultant,
So the moral of this story is "Go to folks who know and who have knowledge" - so look for someone in Tax , who has experience with overseas mortgage and then you need not worry."

Do you get form 1098 for the interest that you have paid on mortgage in india?
I do not think so.
Now do not ask me what is 1098.. This is something that your lender sends directly to IRS and a copy to you during tax period for the interest that you have paid to them. Just like copy of 1099 that you get for interest/divident earned. IRS generally check the amount that you specified on 1040 against 1098(s) that lenders have submitted on your name..

Then, Questions is how do you declare interest income on 1040 without having a 1098?
Do you think your tax guy know everything?

For Home mortgage payments http://www.irs.gov/publications/p936/ar02.html#en_US_publink100037067
Regarding foreign income, read this http://www.irs.gov/faqs/faq/0,,id=199671,00.html
Here's the publication http://www.irs.gov/publications/p514/ar02.html#en_US_publink10001483
I can't find anything on foreign mortgage interest payment deduction... Can you ask your tax guy when he deduct, what is the IRS code which allows him to do that?

H&R block did not allow me to deduct any overseas interest payments.

[gveerab]

YES, you can deduct the mortgage paid on home in other country, but as far as I know you need to meet the following conditions.
-- for any mortgage deductions you need to itemize your tax returns, you should meet this first.
-- you need to declare home in another country as Vacation home or second home. I believe you should stay in that home at lest 20-30 days per year.
-- and also you should not give that home for rent or you need to pay the tax for the rent received from that house.
-- in future when you sell that house, you need to pay capital gain taxes on that property.

All these IRS rules are designed for US citizens, I am not sure how these will be applicable for H1b people. if we follow the tax rules strictly, we need to pay tax on income received on inherited properties in other countries and also for the gifts from in-laws and dowry(in case if you take any) also. I believe all these doesn't make sense. I felt one safe option is, if you don't have significant deductions don't bother to declare.

One other suggestion is, if you have house in US and also have some equity on that house, take home equity loan and pay off the loan in India. You can deduct the interest on taxes officially and also save lot of money on the the difference in interest rate. And now dollar is almost Rs50, so good time to send money to India. :)

[TravInd]

I have few questions as I am totally confused with if's and but's while filing taxes.
I thought some of experienced guys in this forum can share information on these. I want to know about these as I do not want to make mistakes while filing taxes. As of now I have files taxes through a tax consultant. So, I have not made any deliberate mistakes.

1) What if I transfer money to another persons , say for example to my brother, account in India? Should I declare that account and the amount in it. I have sent little bit of money now and then to support my family.

2) What if you have deposited money in NRI joint accounts with a person in India (again that could be my brother)?

3) what if a person has property purchased with inherited wealth or transferred to his name? Some of you guys said that we need to declare them too or else the goverment would find them. How US government find them if we have not purchased with US earned money (meaning not finacial transactions exist for these kind of wealth)?

[number30]

I have few questions as I am totally confused with if's and but's while filing taxes.
I thought some of experienced guys in this forum can share information on these. I want to know about these as I do not want to make mistakes while filing taxes. As of now I have files taxes through a tax consultant. So, I have not made any deliberate mistakes.

1) What if I transfer money to another persons , say for example to my brother, account in India? Should I declare that account and the amount in it. I have sent little bit of money now and then to support my family.

2) What if you have deposited money in NRI joint accounts with a person in India (again that could be my brother)?

3) what if a person has property purchased with inherited wealth or transferred to his name? Some of you guys said that we need to declare them too or else the goverment would find them. How US government find them if we have not purchased with US earned money (meaning not finacial transactions exist for these kind of wealth)?


1. If it is gift then you do not need to. So if you state that money belongs to you then you may need to show that amount and need to pay the taxes on the interest paid.

2. For the joint account you need to pay the taxes on the interest on your part.

3. If you had asset before coming to US that is not an issue even if you declare. But if you are earning any income on that you may have pay the taxes for that.

[add78]

Please go and talk to a tax consultant,

i can provide you 2 links which explain how this can be possible,

http://answers.yahoo.com/question/index?qid=20080304001650AA5nr1v
If the loan is secured by the overseas property you can deduct the interest


http://www.free-press-release.com/news/200903/1237184118.html
And look at the above article, which is another way for you to do it.

One best suggestion i can give to you is, most popular tax websites on their website show you the tax professional background, so you can search for someone who has very good experience and knowledge in the area you are looking for, like for example let me explain my scenario.

I had to do ITIN for my wife, so i went to a tax filing company which was like 0.5 miles near to my home, i enter and inside no one there knew anything about ITIN, the lady would go in to the computer and file the tax and she says provide me ITIN number, i am saying i dont have one , i need to apply then she tries and tries and says computer does not allow me to file a new ITIN application, so i am like freakin fedup, then i go to their website and search for a tax professional who specialized in ITIN and found a guy with 20 yrs experiences and who knows this stuff and he is like 10 miles away from my home, but still went to him, and he knew everything, he applied for a new application for ITIN and attached it to my application.

So the moral of this story is "Go to folks who know and who have knowledge" - so look for someone in Tax , who has experience with overseas mortgage and then you need not worry."

When a lawyer gives out advice on immigration matter, he/she MUST be able to back it up (and you, as a client of the counsel have a right to demand) with underlying supporting law or act or a authoritative memo release. He/she cannot "advise" you because they have "always done it for other clients" or "that has been their standard practice."

Similarly, when a CPA or a Tax Professional advises you, he/she MUST be able to provide underlying applicable IRS publication / Tax Law. Simply going to the "right person", who has the (claimed) knowledge or someone who "knows" how to do it, doesn't cut it.

I do not want to get into details (you can find my other related post about IRS publications and treating second home, regardless of country of origin), for Tax purposes you CANNOT deduct your out of country mortgage interest. If you are, if IRS audits your case, try going back to the "go-to guy" who helped you deduct it, and see if he absolves you of "penalty of perjury". He/She will simply wash his/her hands off pointing you to your very own signature (or electronic consent in case of e-file) under the penalty of perjury section of form 1040. Please be careful.

[piyu7444]

When a lawyer gives out advice on immigration matter, he/she MUST be able to back it up (and you, as a client of the counsel have a right to demand) with underlying supporting law or act or a authoritative memo release. He/she cannot "advise" you because they have "always done it for other clients" or "that has been their standard practice."

Similarly, when a CPA or a Tax Professional advises you, he/she MUST be able to provide underlying applicable IRS publication / Tax Law. Simply going to the "right person", who has the (claimed) knowledge or someone who "knows" how to do it, doesn't cut it.

I do not want to get into details (you can find my other related post about IRS publications and treating second home, regardless of country of origin), for Tax purposes you CANNOT deduct your out of country mortgage interest. If you are, if IRS audits your case, try going back to the "go-to guy" who helped you deduct it, and see if he absolves you of "penalty of perjury". He/She will simply wash his/her hands off pointing you to your very own signature (or electronic consent in case of e-file) under the penalty of perjury section of form 1040. Please be careful.

I cant agree more with add78 !!! I would personally not do it unless someone can point out an IRS publication which gives detailed explanation of how to deduct out of country mortgage interest.