Finance, Forex and Investments

mortgage deduction for a home purchased outside U.S?

I am a resident for US tax purposes, but am a citizen of India. If I buy a home in India, am listed as one of the co-owners of the house and use my US income to pay off the mortgage for the home, 1. Can I get tax breaks in US for the interest paid on mortgage? If so, what are the documents I would need for receiving that tax break? 2. If I use my Indian unearned income(from bank interest, mutual fund dividends) to pay off the mortgage interest, will that Indian income be exempt from US taxes since it is used to pay mortgage interest? tax lady, Thanks for the response 3. For getting the deductible on schedule A, what documents would I need? And, is only the mortgage interest deductible or principal amount and interest are deductible. 4. Currently, my mother and brother would be living in the house in India after we get it through a mortgage. I plan to move into it after I retire. So, will the house still be considered my home? I don't have a house in US and living in rental apartments.

Public Comments

1. are you claiming this as your home? if so how can you be a US resident?
2. 1. If you are in fact a US resident for tax purposes, the mortgage on your first or second home is deductible on schedule A if the loan is secured by the home. 2. The source of the money makes no difference. As a US resident, you are taxed on worldwide income, including India-source income.
3. Dear d 1: Mortgage interest is deductible on Sch A not principal. IRS Pub 939 also says the interest normally is reported on form 1098. This will not be the case in your situation. If the house is your only home YES it is your house for tax purposes. Are you the only one on the mortgage? If yes, that is good. You will need to include a letter of explanation on your return explaining the interest situation. This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provided. Click on my profile to read more. Errol Quinn Enrolled Agent
4. A taxpayer may deduct home mortgage interest on a first or second home that they own, regardless of where the home is located. Your home in India would be considered your second home. It is a personal residence as long as you are not collecting rent from anyone. Get your mortgage document showing the amount of interest, and the name of the institution holding the mortgage. Report the interest, but not the principal, paid on Schedule A as interest not reported on Form 1098. Retain the mortgage documents in case you are asked to show how the interest was figured. Also, since you are a co-owner, it is important to document that you paid the mortgage interest, not another co-owner. So retain those records as well. The source of your money used to pay the mortgage interest does not affect the deduction. Regardless of how you use the interest and dividends earned in India, these amounts are reported on your US tax return and are subject to US income tax.