My father left me a condo worth more than 100K in another country and I rented it out. How to report both the property and the rental income? A step-by-step instruction applicable to TurboTax 2016 would be greatly appreciated.
You will need to report three things:
1. Rental Income
2. Foreign Tax Paid on Rental Income, and
3. Foreign Property Information Reporting on the T1135
Foreign Rental Income
First, complete the T776 Statement of Real Estate Rentals.
1. Using the navigate menu up top, select Income > Rental Property
2. Enter all relevant fields in the T776
NOTE: CRA will not allow you to file your return using NETFILE if the rental address doesn’t have a Canadian province and postal code entered.
As a workaround, we suggest that you enter the foreign address on the “Address” lines, and the foreign city and country in the “City” field. Finally, input your residential province and postal code in the corresponding province and postal code fields.
Foreign Tax Credit
1. Select Find in the top right hand corner
2. Type "foreign" and select Foreign Tax Credit
3. Select Yes to the Foreign Taxes page.
4. Enter the country your foreign property is located
5. In the section “Foreign real property income:”, enter the gross rental income amount, related expenses and the amount of foreign taxes you paid.
NOTE: The amount of income entered on the Foreign Tax Credit form will not add additional income to your return. It is needed, however, to properly calculate the foreign tax credit for the country you specified.
T1135
1. Using the navigate menu up top, select Income > Other Income Sources > T1135
2. Follow the prompts on the screen.
NOTE: The T1135 is information reporting only. We recommend choosing the simplified method if your assets are over $100K but under $250K.
Again, you will need to enter the income corresponding to each of your foreign property. Income entered on the T1135 will not affect your income tax return.
Lastly, the T1135 needs to be filed separately from your income tax return. When you are ready to file, you will see an additional button to file your T1135 using CRA’s NETFILE service.
I'm still not sure how to proceed. Please see the questions I've added. Thank you.
You will need to report three things:
1. Rental Income
2. Foreign Tax Paid on Rental Income, and
3. Foreign Property Information Reporting on the T1135
Foreign Rental Income
First, complete the T776 Statement of Real Estate Rentals.
1. Using the navigate menu up top, select Income > Rental Property
2. Enter all relevant fields in the T776
NOTE: CRA will not allow you to file your return using NETFILE if the rental address doesn’t have a Canadian province and postal code entered.
As a workaround, we suggest that you enter the foreign address on the “Address” lines, and the foreign city and country in the “City” field. Finally, input your residential province and postal code in the corresponding province and postal code fields.
Foreign Tax Credit
1. Select Find in the top right hand corner
2. Type "foreign" and select Foreign Tax Credit
3. Select Yes to the Foreign Taxes page.
4. Enter the country your foreign property is located
5. In the section “Foreign real property income:”, enter the gross rental income amount, related expenses and the amount of foreign taxes you paid.
NOTE: The amount of income entered on the Foreign Tax Credit form will not add additional income to your return. It is needed, however, to properly calculate the foreign tax credit for the country you specified.
T1135
1. Using the navigate menu up top, select Income > Other Income Sources > T1135
2. Follow the prompts on the screen.
NOTE: The T1135 is information reporting only. We recommend choosing the simplified method if your assets are over $100K but under $250K.
Again, you will need to enter the income corresponding to each of your foreign property. Income entered on the T1135 will not affect your income tax return.
Lastly, the T1135 needs to be filed separately from your income tax return. When you are ready to file, you will see an additional button to file your T1135 using CRA’s NETFILE service.
For annual rental payment paid in advance (full year) and the period is straddle between two years. I assume I will report the rental income using accrual method, meaning I will report income and expense just for the year I am filling out my taxes. Am I correct?
Yes, you would report only the amounts of rental income which you actually received for the tax year in which you are filing.
For example: The rent was paid for the period Jun 1st to May 31 the following year. You would only claim the income for seven months - Jun to Dec.
You said "Enter all relevant fields in the T776", and "In the section Foreign real property income: enter the gross rental income amount, related expenses and the amount of foreign taxes you paid."
Does this mean that we should enter rental related expenses (such as foreign tax paid, utilities, etc) on both form T776 and the foreign tax credit page?
@TurboTaxMonica1 I followed your direction, but got stuck when entering FTC paid. As you can see on below screenshot, the cell for real property income is grayed out.
Secondly, are below the place to put the FTC amount?
Thanks.
@TurboTaxMonica, @TurboTaxKim I have also run into same problem. Text box to enter real estate income is not enabled.
I also tried the forms method i.e. update FTC through forms. Double clicking box in FTC form takes me to Foreign slip form and I cannot enter rent here because I have already added details in T776.
EDIT: I was able to get the form to enter FTC, but like mentioned in previous post on this thread the box to enter real estate income is not enabled.
@Vikas1
To enable the rental income in the T776.
Yes, you will need to report three things:
1. Rental Income and expenses on T776
2. Foreign Tax Paid on Rental Income on FTC
3. Foreign Property Information Reporting on the T1135
@TurboTaxDeanna how to enter this - "Foreign Tax Paid on Rental Income on FTC"?
Can you please put some screenshots here? FTC seems to be linked to "Foreign Slip" and filling of T776 doesn't show up foreign rent on FTC.
In the EasyStep you may use the find button to select your FTC form by typing Foreign tax credit. Then it is as simple as following and answering the questions and filling in the amounts.
Follow the link for a more personal Step by Step assistance by upgrading to Premier:
Hi @TurboTaxDeanna,
Have you looked at the following post?
There is no question related to foreign rental income and nor the boxes to enter it are enabled in FTC forms.
Also, I already have premier edition of TT. Support had spent more than hour last week to understand the problem following which they came back and told me that FTC cannot be edited without modifying foreign slip under T-Slips. What really is missing is that foreign rental income from T776 must be included in FTC form.
@Vikas1 I can do some work around by creating a dummy T slip for foreign income, but it did not come through the right line on FTC page. No selection for Real Property Income. I guess this is fine if we could not make it work.
@soewitas are you not going to show rental income in T776? If you put it in both places (T776 and Foreign slip) then rental income ends up getting included twice in your net income.
@Vikas1 Actually, the amount of income you put in the Foreign Tax Credit section does NOT increase your taxable income. It just allows FTC to be calculated based on ration of domestic vs. foreign income. If you are curious you can try make the income zero on FTC section, you will see no changes to your taxable income. The annoying thing, it does not report it in the correct line "Real Property Income". I think TurboTax needs to fix the logic.
@soewitas What box on "Foreign tax credits" screen are you putting your rental income in? In my case I only find "Foreign income - T4 slip box 72" enabled under "Foreign non-business income".
@Vikas1 That is the one I am using right now. I can't find a way to add the amount to a different line. It's weird. This is the first time I have to report foreign rental income and taxes so not sure if it has always been like this or this year has a flaw. Btw, did you try adding it and notice no changes to your income because of it? Thanks.
@soewitas I did not add it here because I don't think that this is the right place to put the amount in. "T4 slip box 72" seems to refer to box 72 on T4 form and my T4 form doesn't have entry for this. This could raise a flag during processing of returns.
You may submit, the information regarding your FTC on form T2209 https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t2209.html, which is completed by using the information on your T5013https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4068/guide-partnership-information-return-t5013-forms-2016.html
The amounts on form T776 are not being processed for the FTC since they are not foreign income, therefore, if you have paid taxes on foreign income, perhaps the option of using this form is not adequate for your situation.
Additional information on federal tax credit: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-40500-federal-foreign-tax-credit.html
@TurboImpotDeanna I think the question is very simple. Can you explain how to enter the income amount from Real Property rental in FTC module in TurtboTax? Looks like @Vikas1 and I could not find a way to do that?
I have no idea what your point here is. I am aware of those CRA forms, is there a way to do so through TurboTax? There should have been a way to edit FTC forms without having to create Foreign slips.
@soewitas1 I haven't decided what I am going to do. I don't want to let go of tax that I should get credit for in Canada.
@Vikas1 I will keep trying to look for a way to solve this. Appreciate you let me know when you find a way. I agree we should report and get credit for it.
The above message was meant to demonstrate what forms need completing in TurboTax for the income to be admissible on your FTC, are the T5013 slip.
Unless you have not paid any foreign income tax on your income or property, then you may file with T776. The amounts on form T776 are not being processed for the FTC, therefore, if you have paid taxes on foreign income, perhaps the option of using this form is not adequate for your situation.