Foreign Home and Mortgage Interest Deduction

By Alex Oware on 06/24/2015 10:00 PM

QUESTION: I am a US Permanent Resident and owns a 2nd home in a foreign country (Russia). Can I deduct the mortgage interest for my second resident in Russia?

 

ANSWER: A second home in a foreign country is the same as a second home in the United States, so all the same benefits apply. An individual can claim interest paid on a second home whether or not the home is in the United States. An individual can also deduct real estate taxes paid on property wherever located.

The property does not have to be a second home in order to deduct the real estate taxes (i.e., it can be a vacant lot in Tasmania).

You can deduct the mortgage interest on your second home (if you meet other requirements), regardless of its location. Other requirements are the same as your main home in the United States. There are no special requirements for the home in foreign countries.

Mortgage interest is deductible under Section 163(h). That code section makes no mention of or denies a deduction for interest paid on a residence located in a foreign country. Code Section 163(e) dealing with original issue discount (OID) makes several references to obligation held by related foreign persons. But there is no similar reference in Section 163(h).

 Thus, if Congress intended to limit mortgage interest deductions to properties located only in the U.S., the code would have been written to exclude foreign residence interest.

***Disclaimer: I am a tax accountant and a CPA , but I am not your accountant or advocate (Unless you have signed up to my services). This communication is not intended as tax advice, and no tax accountant -client relationship results**