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  #1 (permalink)  
Old 03-31-2008, 05:10 PM
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Default Property in India, tax deductible?

Friends, I bought an apartment (err, flat :-)) in India out of my pocket (i.e., didn't take a loan). I've been making regular monthly payments from the US since the flat is going to be ready later this year. Any idea whether I can deduct my installments on my tax return? I'm an EB3 AOS applicant right now and have a PD of 03.

Thanks.

Maverick_2008
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  #2 (permalink)  
Old 03-31-2008, 05:46 PM
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Default Contradicting and might not be possible

Your statements are contradicting. You say you didnt take a loan but then you mention about regular monthly payments.
Generally you can deduct mortgage interest if your bank/lender has reported that on a 1099-INT.
So technically you cannot deduct if your banker/lender is an Offshore entity but the way around it is that you can take a home equity line on your current home here in US and then payoff the banker in India. This equity line should then be tax deductible(conditions apply). Obviously this is available only if you have an existing primary home in US AND you have equity in that.
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  #3 (permalink)  
Old 03-31-2008, 05:52 PM
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Default Clarification

I didn't take a loan but have been making regular monthly payments out of my bank/savings here in the US. I don't own a house here but rent an apartment.

Thanks.

Maverick_2008
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  #4 (permalink)  
Old 03-31-2008, 06:01 PM
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Default monthly payments usually mean you took out a loan

Quote:
Originally Posted by Maverick_2008 View Post
I didn't take a loan but have been making regular monthly payments out of my bank/savings here in the US. I don't own a house here but rent an apartment.

Thanks.

Maverick_2008
Hi Maverick,

You mention that you are making monthly payments for your flat in India, who are you making these payments to (since your flat will only be ready later this year)? Monthly payments usually indicate that you are making payments on a loan. Whatever the case, if the montly payment has a principal and interest, then as the previous member noted, you may be able report the interest as a deduction.

Something to be aware of is that in the US you are subject to worldwide income. I am not sure if this means that you will have to pay property tax in the US on your flat in India. You should consult an International Tax Accountant.
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Last edited by NolaIndian32; 03-31-2008 at 06:05 PM.
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  #5 (permalink)  
Old 03-31-2008, 06:10 PM
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Default

I think the OP meant that he is making regular payments to the builder of his apartment based on % work completed. I seriously doubt that you can make deductions or get any benefit based on these facts...
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  #6 (permalink)  
Old 03-31-2008, 06:59 PM
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Default

Quote:
Originally Posted by Maverick_2008 View Post
I didn't take a loan but have been making regular monthly payments out of my bank/savings here in the US. I don't own a house here but rent an apartment.

Thanks.

Maverick_2008
you can't take the deductions on this house unless you are paying any interest amount.
you can always buy property as vacation home and deduct interest payments but I donot see any benefit here unless interest is too high(you have to do itemized deductions) i.e > Standard deductions.
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  #7 (permalink)  
Old 03-31-2008, 07:01 PM
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Default

Quote:
Originally Posted by Maverick_2008 View Post
Friends, I bought an apartment (err, flat :-)) in India out of my pocket (i.e., didn't take a loan). I've been making regular monthly payments from the US since the flat is going to be ready later this year. Any idea whether I can deduct my installments on my tax return? I'm an EB3 AOS applicant right now and have a PD of 03.

Thanks.

Maverick_2008
I don't see any mortgage interest payments. Tax deductions are on interest payments on mortgage loans. If you had taken a loan then it would have been a different story.
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  #8 (permalink)  
Old 03-31-2008, 07:02 PM
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Quote:
Originally Posted by NolaIndian32 View Post
Hi Maverick,

You mention that you are making monthly payments for your flat in India, who are you making these payments to (since your flat will only be ready later this year)? Monthly payments usually indicate that you are making payments on a loan. Whatever the case, if the montly payment has a principal and interest, then as the previous member noted, you may be able report the interest as a deduction.

Something to be aware of is that in the US you are subject to worldwide income. I am not sure if this means that you will have to pay property tax in the US on your flat in India. You should consult an International Tax Accountant.
Property tax is state tax depending on physical location. He will be liable for property tax in India only.
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  #9 (permalink)  
Old 03-31-2008, 07:06 PM
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Default would $1000 per month qualify

how much is the standard deduction ?

what if i was paying $1000/- as interest on an EMI of $1200/-
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  #10 (permalink)  
Old 03-31-2008, 07:12 PM
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Quote:
Originally Posted by gc2 View Post
how much is the standard deduction ?

what if i was paying $1000/- as interest on an EMI of $1200/-
Single or Married filing separately - $5,350
Married filing jointly $10,700
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  #11 (permalink)  
Old 03-31-2008, 07:32 PM
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Default

Quote:
Originally Posted by Maverick_2008 View Post
Friends, I bought an apartment (err, flat :-)) in India out of my pocket (i.e., didn't take a loan). I've been making regular monthly payments from the US since the flat is going to be ready later this year. Any idea whether I can deduct my installments on my tax return? I'm an EB3 AOS applicant right now and have a PD of 03.

Thanks.

Maverick_2008
-
Maverick,

This is a tax issue and US tax guidelines are pretty specific. I suggest that you consult a CPA when you file 2007 taxes. Unless an IV member who is a certified tax professional or a CPA can share their professional view.

I say this because you will be responsible for all information on your tax return, if you file your taxes through a CPA and he advises you then that option is advisable.

I know a person whose company accountant advised him incorrectly regarding a tax deduction and he had to clarify that to IRS. It all worked out in the end but it was a hassle. Learn from other's mistake and consult a CPA regarding any advise that you get from 3rd parties regarding your taxes and if you take advise from a CPA there is no point debating a tax issue on the forum.

Hope you get my point.

Cheers!
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Last edited by gsc999; 03-31-2008 at 07:36 PM.
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  #12 (permalink)  
Old 03-31-2008, 07:37 PM
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Cool No deductions

Maverick:

You cannot deduct any of the payments on your tax for 2007, since it is not a home equity or mortgage loan. The best way to get tax deduction is to buy a house in US, pay 20-25% down payment, take a home equity after the purchase and buy on cash in India....You will see your property appreciate faster than the US or Indian stock market.

Last Year I did what I said and brought property on cash in India. Additionally I checked with H&R and asked them if I need to mention anything in my taxes for 2007. They confirmed that for now I do not need to do anything, however when I sell the property, then I will have to pay capital gains on the increase.......so until then...hopefully new rules will come and I would not have to pay any taxes in US.....BTW I have received my tax return...which has been approved by IRS for 2007, based on what I have said above.

All the best....BTW I am not a tax expert...please do consult a CPA before u take any action

Last edited by FinalGC; 03-31-2008 at 07:39 PM.
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  #13 (permalink)  
Old 03-31-2008, 11:15 PM
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Default 1099-INT needed

Like I said earlier, unless you get a equity credit line on your primary home in US any other property's mortgage interest needs to backed by a 1099-INT.
What this means is that, Uncle Sam needs to be paid. When your lender sends you a 1099-INT, he reports that as Income to IRS. So he is paying tax on that income while you get a deduction.

So the point is either you or your lender needs to pay tax to Uncle Sam. IRS systems pretty much match up the deductions with income based on Tax-Ids. If these numbers dont match, then you will see an audit.
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  #14 (permalink)  
Old 04-01-2008, 12:27 AM
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As per my understanding and discussions with the CPA, mortgage payments are deductible whether they are in US or Outside US
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  #15 (permalink)  
Old 04-01-2008, 12:41 AM
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Default

Quote:
Originally Posted by Maverick_2008 View Post
Friends, I bought an apartment (err, flat :-)) in India out of my pocket (i.e., didn't take a loan). I've been making regular monthly payments from the US since the flat is going to be ready later this year. Any idea whether I can deduct my installments on my tax return? I'm an EB3 AOS applicant right now and have a PD of 03.

Thanks.

Maverick_2008
Any Interest + Property tax might be deductible. This is irrespective of whether its in India or US. Even in US, people can deduct only interest portion of monthly payments.

How ever if you have an intent of renting it out, then all upgrades to the house after its made could be business expenses.

You will need to add the income you earn as rental to you taxable income in US.

In fact, US taxes requires one to declare worldwide income...... SO not just rental income, but also any other income in Fixed deposits, stocks, savings accounts etc has to be reported in US as taxable in the strict implementation of the US tax laws.

To add to the complexity is the double taxation treaty between US and India, so any tax you pay in India might become a credit in US.

Please contact an experienced accountant, for a detailed analysis.

Last edited by chetanjumani; 04-01-2008 at 12:45 AM.
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