Foreign Mortgage Interest Deduction

US expats can claim many of the same deductions on their US expatriate tax returns as taxpayers back in the United States. If you own a home overseas, you may qualify for the mortgage interest deduction on your foreign home.

Can I deduct the mortgage interest I pay on my home overseas?

Yes. As an American or green card holder living abroad you are able to deduct mortgage interest paid on a foreign qualified home if the following conditions are met:

  • You itemize your deductions on Schedule A and
  • You have an ownership interest in a qualified home on which the mortgage is a secured debt

What is a qualified home?

This generally means your main or second home (yes, you can deduct interest on two homes with certain limitations). A home can be a:

  • house
  • condominium
  • cooperative
  • mobile home
  • house trailer
  • boat or
  • similar property and

It must have cooking, sleeping and toilet facilities.

What is secured debt?

Debt is secured if you sign an instrument such as a mortgage, land contract or deed of trust and your home would be used as collateral to protect the lender. Additionally, if you are unable to pay your debt, the home would serve as payment to the lender to pay the debt.

The loan can be a primary or secondary mortgage, line of credit or a home equity loan.

How much interest can I deduct?

Generally, you can deduct the interest on you main and second home for up to $1 million of acquisition debt. If you have an equity loan, the interest on loans up to $100,000 can generally be deducted.

There are some exceptions to these rules so it is advisable to contact an expat tax professional to determine how much you can actually deduct.

Casualty, Disaster and Theft Losses

Charitable Donations

Foreign Real Estate Taxes

Medical Deductions

By Stephen Stambaugh

Last updated October 8, 2013