Rental Real Estate & Income Properties in Colombia
Reporting foreign rental property income requires special knowledge above-and-beyond what’s needed for U.S. rentals. In Colombia, we have the expertise.
Real estate projects in Medellin, Bogota, Cali and other popular cities have been flourishing. At USATax.co we have seen an increase in our clients who are buying these properties and taking advantage of them as investment opportunities for rental income. However, whether your properties are located in the U.S. or Colombia, rental property income tax must be reported.
According to the IRS, a rental property is defined as a single house, mobile home, vacation home, apartment, or condo. And any income you generate from that rental property is considered income that you report on your tax return whether it came from Huntington Beach, California or El Poblado, Colombia.
Rental property income and expenses are reported on Form 1040 or 1040-SR, Schedule E, Part 1. If you have three or more rental properties, you will complete a Schedule E for each property. Therefore, maintaining pristine rental property records will be essential for tracking your income and expenses.
What’s Rental Income?
It’s also important to note how the IRS defines rental income. Any payment you receive from a renter for use or occupying the property is considered rental income. This also includes security deposits and last month’s rent. However, if you plan to return the security deposit at the end of the lease, do not include it as income.
If the renter breaks the lease and has to pay for canceling, that is also considered income that you would report. Also, if the renter pays for any expenses, like water and sewage, this can be counted as income if the costs are deducted from the rent payment.
What’s Deductible?
When it comes to rental property deductions, this is where an experienced tax professional can be the most help. There are certain rental expenses that you can deduct such as:
However, the IRS usually does not allow rental property owners to deduct the cost for improvements. There are specific requirements an improvement needs to meet to qualify as a deduction. However, you can claim depreciation on improvements with Form 4562.
Keep in mind that proper currency conversations must be done for any income or deductions received or taken in Colombian pesos.a
Experienced in Colombia
If you rent properties in the U.S., Colombia, or both, the tax professionals at USATax.co can help you meet all reporting requirements and apply for those key deductions. Our team works with U.S. expats located all over Colombia, and we’re ready to make your next tax filing quick and stress-free. Book a consultation today to get started for this year’s filing season.