Tax Treatment of Foreign Rentals
Taxpayers who own rental properties in foreign countries need to be aware of the IRS's rules regarding these properties.
Foreign rentals are treated the same as any other real estate a taxpayer might own in the U.S. and are reported on Schedule E, except: property outside the U.S. that a taxpayer rents out must use ADS depreciation instead of MACRS (30-year straight line for a residential rental if acquired after 2017; otherwise, 40 years).
Foreign rentals held directly by the taxpayer are not subject to FBAR or Form 8938 filings, but foreign real estate held through a foreign entity itself is a specified foreign financial asset and its maximum value includes the value of the real estate, which no doubt would require the filing of the Form 8938 with the 1040.
There might also be a foreign tax obligation and potentially a foreign tax credit on the U.S. tax return.
CAUTION
A foreign bank account may be established to deposit the rents before transfer to the U.S. landlord. If the bank account at any time during a year exceeds the FBAR $10,000 threshold, it would trigger an FBAR reporting requirement (FinCEN 114).