Moved Abroad but Still Own U.S. Property (or Business)? What You Need to Know to Stay Compliant and Save on Taxes

If you’ve recently moved to another country but still own rental property or run a business in the United States, this article is for you. It’s more common than most people think — but many don’t handle the tax side properly. Done right, you can avoid double taxation, maximize deductions, and keep more of your earnings.

Why This Matters

• The U.S. taxes its citizens and green card holders on worldwide income — that means rent, business income, dividends, etc., no matter where you live.
• If you’re paying taxes in another country on income earned there (or connected to your U.S. property), you may be eligible for the Foreign Tax Credit.
• Reporting requirements can be more complex when you’re outside the U.S., or if your property is abroad or owned through entities. Mistakes can lead to penalties or losing out on credits.

What Filings & Forms You Probably Need

How the Foreign Tax Credit Works (and Why It’s Critical)

• The Foreign Tax Credit lets you offset U.S. tax due by the amount of foreign taxes you’ve already paid on the same income. This helps prevent “double taxation.”
• To claim it, you must file Form 1116 (for individuals) and satisfy various tests, such as that the tax is imposed, paid or accrued, legal, and is a tax on income (or income-in lieu).
• It’s not unlimited — the credit is limited to U.S. tax on foreign-sourced income. Sometimes you may have to choose between a deduction or a credit, depending on your situation.

Reporting Foreign Rental Property Income

If you own a property overseas and rent it out, here are the important steps:

1. Convert all amounts to U.S. dollars using IRS-approved rates (e.g. yearly averages) for both income and expenses.
2. Use Schedule E (Form 1040) to report income, expenses, depreciation, etc.
3. Deductible expenses typically include mortgage interest, property taxes, repairs, insurance, property management fees, etc.
4. Depreciation rules differ: foreign residential properties are depreciated over 30 years (straight line under the Alternative Depreciation System) rather than the 27.5-year schedule for U.S. residential property.
5. If you use the property personally for part of the year (vacations, family stays, etc.), you may need to allocate expenses between personal and rental usage.

Common Mistakes to Avoid

• Not claiming the foreign tax credit even though you qualify.
• Using inconsistent exchange rates for income and expenses.
• Forgetting to file FBAR / FATCA when foreign bank accounts are involved.
• Mis-classifying property usage (personal vs rental) and thus mis-allocating deductions.
• Owning through foreign entities without realizing the extra information filings required.

What You Should Ask (or Confirm) with Your Accountant

• “Have you filed all required U.S. forms (Schedule E, Form 1116, FBAR/FATCA, entity info forms) for my current situation?”
• “Have you properly converted foreign currency income and expenses into USD according to IRS guidelines?”
• “Is depreciation being calculated appropriately (30 years, foreign property)?”
• “Am I claiming all allowable deductions?”
• “Have I paid foreign taxes that qualify, and can I apply them as a credit so as to avoid paying twice?”

If you moved abroad but still have U.S. rental property (or business interests), it’s not enough to just file a simple return. The tax rules are layered: property reporting, foreign tax credit, currency conversion, depreciation, entity structures, etc.

Getting the right filings done correctly can save you money and reduce risk of penalties. If you’re unsure whether your accountant is handling all of this properly, now is a good time to review or get a second opinion.