Discussion:Mortage Interest Deduction
From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.
From TaxAlmanac
Revision as of 12:53, 26 April 2007; view current revision
←Older revision | Newer revision→
←Older revision | Newer revision→
Discussion Forum Index --> Tax Questions --> Mortage Interest Deduction
| 26 April 2007 | |
| Does interest paid on a second home located in Canada qualify for the mortgage interest deduction (i.e. does it have to be US property to qualify)? | |
Michaelstar (talk|edits) said: | 26 April 2007 |
| From a logic stand point - if we as t/p's are required to report and pay tax on our worldwide income - why would we not be allowed to deduct our worldwide expenses as long as those expenses qualified under the IRC. I would say absolutely. | |
| 26 April 2007 | |
| As long as the mortgage interest would have been deductible if the house were in the U.S., then it would be deductible with a property outside the U.S. However, if the taxpayer is resident in the U.S., then the taxpayer would have to withhold tax on interest paid to non-U.S. persons. The statutory rate is 30% (Sections 871(a) and 881), but the U.S.-Canada Income Tax Treaty reduces the rate to 15%. Form 1042 should be filed to report the interest paid and tax withheld.
In addition, if the mortgage loan is not denominated in U.S. dollars, then repayment (or refinancing) of the loan may trigger taxable currency gains. If you rent the property, then you must include the income on your U.S. tax return (and can claim a foreign tax credit for foreign taxes paid). | |
