Topic · US expat tax
Foreign Rental Property & US Taxes for Expats
Why worldwide rental income goes on Schedule E, how foreign property is depreciated over a longer period, and how the Foreign Tax Credit and currency fit in.
By Danilson Ramos · Founder, Atamatax
Updated July 2026
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If you own a rental property abroad, the U.S. generally taxes your worldwide income — so the rent is reportable on your U.S. return, typically on Schedule E, even if the property and tenants are entirely outside the U.S. The good news is that ordinary rental expenses are generally deductible, and foreign tax paid may be creditable.
Income and expenses on Schedule E
Rental income is reported gross, with deductible expenses offsetting it. Amounts in a foreign currency are translated into USD. Common categories line up roughly like this:
| Side | Examples | Note |
|---|---|---|
| Income | Rent received, certain tenant payments | Reported in USD; foreign currency translated |
| Operating deductions | Mortgage interest, repairs, management, insurance | Generally deductible against the rental income |
| Foreign property tax | Local real-estate tax on the property | May feed the Foreign Tax Credit / be deductible — fact-specific |
| Depreciation | The building (not land) | Foreign residential property generally uses a longer ADS period |
Depreciation: the longer foreign period
Depreciation is one of the biggest differences. Foreign rental real estate is generally depreciated under the Alternative Depreciation System (ADS), which uses a longer recovery period for foreign residential property — often around 40 years — versus the shorter period used for comparable U.S. property. That means a smaller annual deduction than many owners expect.
Foreign tax and currency
- Foreign income tax paid on the rental may be creditable via the Foreign Tax Credit (Form 1116) — though the FEIE doesn't apply, since rent is passive, not earned, income.
- Foreign property/real-estate tax treatment is fact-specific and can interact with the FTC.
- Currency: income, expenses, and the depreciation basis are all handled in USD, with consistent translation.
Renting out a property abroad?
The free Tax Risk Check helps you think through Schedule E reporting, foreign depreciation, and the Foreign Tax Credit. Atamatax provides preparation support; this is not individualized tax or legal advice.
Authorities cited
- IRC §911 — IRC §911 — Foreign earned income exclusion + housing exclusion/deduction
- IRS Form 2555 — About Form 2555 — Foreign Earned Income (FEIE + housing)
Primary sources (Cornell Legal Information Institute for the US Code and CFR; IRS.gov for forms, procedures, and treaty documents). This page is general information, not individualized tax or legal advice.
Atamatax provides tax preparation support and educational resources. This website does not constitute legal or tax advice.