Tax Advantages of Investing in Real Estate Overseas

US News

Everyone knows that investing in real estate in the United States brings some benefits around April 15 each year. You can depreciate your rental property, deduct your mortgage interest and write off maintenance, repairs and other associated expenses of managing the asset.

What U.S. investors may not realize is that you can enjoy all those benefits when investing in real estate outside the country, as well. Plus, investing in real estate overseas brings additional tax advantages.

For example, it's not only the costs of maintenance and repairs of foreign property holdings you can write off on your tax return each year, but the travel associated with scouting for, purchasing and then managing (in the case of a rental) any real estate investment overseas, too.

Years ago, I knew a woman named Janet who bought land on the southwestern coast of Ireland, in Kerry. On this land Janet built two houses, one for her personal use and one to rent out. Each summer, Janet took a trip to Kerry to check on her rental property and to meet with her rental manager. During the visit, she stayed in one of the two houses she built, her Irish home. The income from renting out the second of the two houses covered the carrying costs and then some for both properties, with money left over to subsidize Janet's annual holidays on the Emerald Isle. Then, every April 15, Janet was able to take those travel costs as deductions on her U.S. tax return.

In addition, as a property owner overseas, you can enjoy tax benefits in the country where you've invested. Many countries impose very low, even negligible property taxes (France, Ecuador, Uruguay, and Colombia, for example) or no property taxes at all (Croatia and New Zealand). This can be a big plus for a property owner overseas, eliminating what can be the single biggest carrying cost for U.S. real estate.

Further, some countries impose no capital gains taxes on real estate proceeds (Argentina, Belize, Nicaragua, Croatia, and New Zealand, for example), which is a very big advantage for investors.

Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group. With more than 28 years experience covering this beat, Kathleen reports daily on current opportunities for living, retiring, and investing overseas in her free e-letter. Her newest book, How To Buy Real Estate Overseas, published by Wiley & Sons, is the culmination of decades of personal experience living and investing around the world.



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