How to report income from rented out foreign property that was inherited?

[TurboTaxHeba · Accepted solution]

This thread has many questions and I will try to provide an answer to all.

If you are renting personal property (you stay in this property when visiting) to cover the expenses, then you don't have to report it as a foreign rental income. If you are renting a personal property to make revenue (income) and the cost value of the property was $100K CAD or more, then you have to report the income.

To report the foreign rental income, there are two methods used in TurboTax:  

1. Report the net amount on the Foreign Income Slip or  

2. Report the gross/loss on the Rental T776 form.  

Reporting the net amount on a Foreign Income Slip: Do Not Use T776

1. Foreign Property Verification Information Reporting on the T1135 

2. If the net rental income is above zero > use the other income box and the tax deducted box  

However, If the net rental income is below zero (loss in revenue) you will not be able to you the foreign slip> use other deduction profile and use the Foreign Tax Slip form. 

Reporting the gross/loss using T776: 

You will need to report three things: 

1.    Rental Income on a T776 form whether it is in a gross or loss amounts

      Use your Canadian address in the form > change the city to the foreign country's city

2.    Foreign Tax Paid on Rental Income on a Foreign Tax Credit form, and 

3.    Foreign Property Verification Information Reporting on the T1135 

If you are using the Foreign Tax Credit Profile with any of these reporting options: 

• If you are using TurboTax Online: Report the income and tax paid under the "Foreign Real Property"   
• If you are using TurboTax Desktop: Report the income and tax paid under the "Foreign Business Income" 
• Any income reported under this profile will not double your rental income.  

If you have foreign Investment to report> you either report it under the foreign income slip, or you report the slip you receive from you Canadian broker

I hope this was helpful

[Vikas1]

@TurboTaxHeba why does this kind of difference exist between TT online and desktop versions? Why should the mode of filing taxes govern the head under which an income is put in?

I have a desktop version and clearly what is being done in online version makes more sense. Will TT allow me to switch to online version from desktop version that I have?

[TurboTaxHeba]

Both reporting methods are available for online and desktop users. 

Only the reporting of the foreign tax credit is done slightly different if you need it. 

Unfortunately, you can't switch your data from the desktop to the online product. They are two different platforms. Both methods of reporting will give you the exact final result. If you are using TTD, report your tax under Foreign Business Income and you should be ok. 

I hope this was helpful 

[Xmei]

I followed all the steps but why is there still no show of foreign tax credit in my summary. 

[Sbk]

In Foreign Tax Credit profile form as mentioned, while reporting "Foreign Real Property Income" will it make any difference if we report Gross Rental Income or Net Rental income?

Say if we report gross rental income, i believe we need to report all expenses in "Deduction from Foreign Real Property income" and all income tax paid on "Foreign Tax Paid on Real Property Income".

And if we report net rental income on "Foreign Real Property Income", then we need to report zero in "Deduction from Foreign Real Property income" and all income tax paid on "Foreign Tax Paid on Real Property Income".

Both the above methods seems correct but not sure

1.. Which is the correct, whether the use of Gross or Net Rental income in this Foreign Tax Credit Profile Form?

2.. Which one will gives more FTC credits considering the domestic (Canadian) income is lesser than foreign rental income.?

[tax-go]

@TurboTaxHeba 

I read through these instructions but some critical things are missing - like where do property taxes go. And are property taxes eligible or only income taxes for the tax credits?

I have a US rental property. I was able to enter everything for it in form T776, except property taxes. If I include property taxes then I'm at a slight net loss -223 but if I exclude them then I'm at a profit ~3k. On my US 1040NR return, the property taxes paid bring my tax due to zero. But I don't know where to put US property taxes paid on my CRA return.

Also, on foreign tax credits FTC form, is the income gross income or net income? Same question if using the foreign tax slip method - enter net income or gross income? And can loss -negative income be entered or we put zero if in a loss when using the FTC method or foreign income slip method?

Thank you.