Foreign rental property and U.S. taxes

Foreign rent is U.S. taxable income for U.S. residents

If you are a U.S. citizen or U.S. tax resident and you rent out an apartment in Taiwan, China, or anywhere else, the rent is part of your worldwide income. You report it on your U.S. return even if it is paid in Taiwan dollars, deposited in a Taiwan bank, and also taxed in Taiwan.

The good news: the same rental rules that apply to U.S. property generally apply here too. You report rent, deduct expenses, and depreciate the building — with a few international differences.

Step 1: Report all rent

In most cases you must include in income all amounts you receive as rent. If your tenant pays an expense for you (for example, a repair bill), that payment is rental income too — and you can deduct it if it is a deductible rental expense. Report the property on Schedule E; for a property in a foreign country, enter the city, province or state, country, and postal code as the address.

Step 2: Deduct ordinary rental expenses

Publication 527 lists the most common rental expenses, including advertising, cleaning and maintenance, commissions, depreciation, insurance, legal and other professional fees, management fees, mortgage interest paid to banks, repairs, taxes, and utilities. Foreign property managers and agents' fees fall into the same categories. Keep receipts — in any currency — and convert them to U.S. dollars.

Step 3: Depreciate the building — on the ADS schedule

You can't depreciate land, so first split your cost between land and building. Then, because the property is used predominantly outside the United States, IRS Publication 946 requires the Alternative Depreciation System (ADS) — straight-line over a longer period than U.S. rentals:

Your depreciable basis is generally the building's cost in U.S. dollars when you bought it. If you lived in it before renting it out, the basis for depreciation is the lesser of its adjusted basis or its fair market value on the date you converted it to a rental — get help with that calculation.

Step 4: Convert to U.S. dollars

Every amount on your return must be in U.S. dollars. The IRS's general rule is to use the exchange rate in effect when you receive or pay each item. The IRS also publishes yearly average rates — for 2025 it lists 31.167 Taiwan dollars per U.S. dollar — and it generally accepts any posted exchange rate that you use consistently.

A worked example

Grace, a U.S. resident, rents out her apartment in Taichung for NT$30,000 a month during 2025:

She reports about $11,551 of rent on Schedule E, deducts her expenses and ADS depreciation, and then looks at whether a foreign tax credit applies for the Taiwan income tax she paid on the rent.

Step 5: Avoid double tax with the foreign tax credit

If you paid qualifying foreign income taxes on the rental income, you can generally choose either a foreign tax credit (Form 1116), which reduces your U.S. tax, or an itemized deduction, which reduces your taxable income. In most cases the credit is more valuable. Only income-type taxes qualify for the credit. See the foreign tax credit guide.