Tax Question on US Investments

Hello everyone

I bought two properties on the US early this year. Both properties are rented and both tiny bid cash-flow postive.

Properties are on my name as of today. I borrowed money here in Australia to buy those properties.

Can I tax deduce my interest payments here in my Australian tax return?

My accountant advised me that I must deduce my interest payments, my trip to US, reno and associated costs in my US tax return.

The problem is that I made no money over there and I wont get much benefit of it. I'd like to deduce them here where I make more money.

What do you think? If you wanna share the way you structure your taxes would be much appreciated.

Thanks a lot in advance.

Frank

How did you go?????

Gary

Hi Frank,

I don't know all the answers to your questions but I'm aware that tax expenses in the USA can be carried forward for many years...
20 years? So you'll have plenty of time to use those deductions.

I think your Aus accountant is right, you can't claim overseas investing expenses against your Aus earnings.
In Aus if you negatively gear as you know you can claim against that expense. But not against the expense of investing overseas.

I hate to rain on your parade, but I am mystified why you bought in USA for a minimal cash flow? You will need to pay a US accountant to prepare your tax return in USA, so will end up (perhaps) with a loss. Do you have an ITIN? (tax file number in US lingo), which you will need to have a US tax return filed, ie to fulfill your legal requirement in USA.
Hopefully you bought at or below market price, thankfully your places are rented out, and perhaps the capital gain over time will make it worthwhile. If you have good property management, you have done very well I would think!

Sorry to rain on your parade!

From the ATO website...perhaps get an accountant familiar with OS investment property!

Claiming rental deductions

Remember:

Tax deductions on your rental property can include

– rates

– interest

– insurance

– real estate agent fees

– depreciation

– deductions for capital works.

If your overseas property tax deductions are greater

than your overseas rental income, you will have a

foreign income loss.

You can use your foreign income loss to reduce

your Australian income.

Dont forget 1042-s which applies to all foreign investors go to IRS.gov
http://www.irs.gov/businesses/small/international/article/0,,id=129631,00.html
Also read up of "Tax Treaty" Between Aud and US and find your self a good account here and there.
And with a llc you will be able to claim on your rehabb repairs/cots as a Individual you wont.
US accountants wont tell you these things as its actually not there job to, Its a r/e attorney that gives that advice.
There a different set of rules for foreign investor in the us compared to residents.

"What do you think? If you wanna share the way you structure your taxes would be much appreciated"

Hi Frank
I have been purchasing properties in US using LLC, I have 3 properties in each LLC to minimise my exposure, my trust is a member of each LLC.

I am using Australian funds to purchase the properties and setting up loans for each property.  I will charge each LLC interest, still working out how much, possibly around 9.5%.

 My accountant has also organised my US tax returns to align with Australian Tax return, makes sense to me, I want both submitted at same time.

Cheers, WI