Income, Tax, Deductions: TQ Questions Explained

Topics covered:

Did you convert Traditional IRA, SEP, or SIMPLE IRA to a Roth IRA? (either all or partially)

These are U.S. pension plan types, not applicable if you do not have U.S. retirement plans.

If you don't know what they mean - that means you don't have one and can safely select   NO.

We will determine whether conversion is taxable or not.

Do you want to list various expenses that might improve your tax position?

A personal tax return can be prepared either by utilizing the standard deduction or by itemizing expenses.

After the tax reform of 2018, the standard deduction was doubled, so the percentage of people who benefit from using itemized deductions has been greatly reduced. We offer you the ability to list your expenses in the TQ, but please note you may not need to do this as the total expenses needs to be quite large to make sense. It

If you have expenses that are for your business, rental property, sale of property, etc - please list them inside those sections of the TQ, not in the Deductions section.

Highest balance during the year

What this is

Highest positive balance on the account reached over the year -   even if only for one day and then transferred to other account or used for purchase/reimbursement / etc. This is the FBAR requirement.

Where to find it

Monthly statements from the bank or brokerage house. Some banks provide the highest annual balance on the year-end statement.

If the account has financial instruments - such as shares or securities.

Since the value of securities fluctuates throughout the year, report combined value at the end of the reporting year

Please note - if the highest balance for the account during the year was NEGATIVE - it does not have to be reported (ie this would be the case if the account is used for lending you money as opposed to keeping money in it).

If the account is shared by multiple co-owners - report the actual highest balance (without any splits). The next question will ask about how many co-owners there are.

If you can not find the actual figure - please do your best at estimating it.

Did you maintain a home in the U.S. while living abroad?

Maintaining a U.S. home refers to the U.S.   residential property maintained by you - regardless of whether it's rented out or not.

If you own a parcel of land or commercial property   it is not considered a home.

This is one of the factors that also determine your state filing requirements.

It can be a private house, rental apartment, even a boat - a place where you can stay when you return to the U.S. permanently or temporary. Hotel, friends house or parent house does not qualify. It has to be a place where you can legally stay at any time through direct ownership or lease agreement.

Lastly - if your spouse resides in the US:

  •  If filing a joint return, you can answer YES to this question.

Maintaining a home does not imply ownership or rent. It is just a place where the taxpayer (or spouse, if filing jointly) may stay at any time when in the U.S.

  • If you file separately then the answer is NO.

This does not include local Social Security payments, property or wealth tax

I.e. please report here what is equivalent to the INCOME tax only (i.e. impots sur revenus in France; Einkommensteuer in Germany, Impuesto Sobre la Renta in Spain).

If you are unsure - please check with us.

Indicate the monies actually PAID during the calendar year

Very important - please indicate the monies actually   PAID during the calendar year, not the amount of tax assessment (which may not be known until the following year). In some cases, It may be tax paid on the prior year income.

For example - you paid $10,000 tax in 2014 for the income you had earned in 2013 (because your local tax office only sent you the bill in 2014). You also know that you will have to pay $30,000 income tax for the 2014 tax year but only sometime in 2015.

If you are answering TQ for 2014, you should answer that you paid $10,000 income tax in 2014 because that is the actual monetary amount of tax that you paid during the calendar year.IRS does not care about your complicated relationship with the local tax office - only the real dollars and cents (or local equivalent) that you actually paid them.

To summarize - these are the actual tax payments made during the calendar year, regardless of the year to which the taxes relate.

If all or part of your income was pension/disability 

If all or part of your income was pension/disability and you are not sure how it was taxed in your local country vs regular income please leave a comment "  Lumped with tax paid on other income" in the box where we ask you to report tax paid on wages by clicking on the pencil icon. Repeat the same in the box where we ask you to report tax paid on pension.

We will prorate the total amount of tax paid to different income types. For the purpose of the foreign tax credit, taxes paid on wages and pension/disability cannot be lumped together.

If you simply earned a salary and had taxes withheld from it

Provide us with the total amount withheld during the calendar year. I.e. let's say you earn $5,000 per month and $1,000 was taken for income tax (NOT Social Security) - your total income tax paid would equal $12,000.

At any point during the calendar year, was the sum across all your non-US financial accounts over USD 10,000?

The question asks if you had a financial interest in or signature authority over a financial account (such as a bank account, securities account, or brokerage account). It also includes accounts in which you have   future financial interest, such as retirement accounts, life insurance policy or trust. Basically, if it's an account with some monetary value on it - it has to be reported.

$10k threshold refers to any one point in time during the calendar year

This $10k threshold refers to any one point in time during the calendar year, even if only for one day.  When we say 'your accounts' we mean either your own accounts or accounts over which you have signatory authority. If you had 8k in one account, and 4k in another (i.e. the total was greater than $10k), you would answer Yes to this question.

Do not count loans

Please do not count any loans you might have. Any account with  a negative balance is ignored for the purposes of this calculation.

Has the property been occupied by you as your main residence for at least two out of the five years prior to the sale?

If you pass this residency test you may qualify for the maximum exclusion of gain $250,000 ($500K for married filing jointly) from your income. Few exceptions are available to this test. For exceptions schedule an appointment.

Please see this article for more information.

Did you make contributions to a U.S. IRA, ROTH IRA, or SEP accounts during the filing year?

This question refers only to self-funded individual retirement accounts. Employer-sponsored plans (such as 401(k) and 403B) do not belong here.

IRA contributions will reduce your taxable income.

Please note - contributions mean new money added from outside of the account. Reinvestment is not considered a contribution. 

ROTH IRA - we will calculate whether they are excess contributions.  If so, we will advise on how to fix this.

Please note - the deadline for making contributions to ROTH IRA is your tax return filing deadline [there are no extensions]. Usually, it is April 15.

Did you receive U.S. retirement distributions (such as Social Security, IRA, 401-K, government or military pension)?

We will determine if this is taxable or exempt, but it needs to be reported to the IRS.

Do you have an annual tax summary (ie local W2) from any country outside of the U.S?

This question refers to the official document that may be also be called Tax Assessment or Tax Declaration. It summarizes all your income and taxes paid for the year.

  • If your resident country Tax Authorities do not require you to produce it and do not present you with one either, the answer is NO.
  • If you don't yet have the annual Tax Assessment but expect to get it later this year - you have an automated extension through June 15th. We can prepare the draft of your tax return now based on the information available based on tax actually paid during the year - even if the tax was on income earned in the prior year. When you upload the tax assessment form we will adjust the amount reported on tax return only if you are due a refund. Otherwise, the amount actually paid will remain unchanged.
  • If you are filing a joint return with your spouse in your resident country, then you have to answer YES (even if you have no income of your own).
  • If the tax declaration covers only part of the year (because your local country tax year doesn't coincide with the US) - please answer YES. We still want to see it.
  • If tax assessment was automatically filed by the resident country tax authority - please answer YES to this question.
  • If you live in the U.S. but file taxes in another country - we would need to see the tax return for that country.
  • If you file taxes in multiple countries - we would need to see tax declarations for all of them where you file tax returns.
  • If you are not filing a tax return in the residence county and local Tax Authorities do not provide you with an annual tax assessment document, the answer is  NO.

Are you required to pay income tax in your resident country?

Please note - the answer should only be NO only if you are generally exempt from tax obligations in the resident country regardless of how much you earn (i.e., you live on a tourist visa and are not allowed to work in the country). 

Answer YES in all other cases - whether you actually pay tax or not (for example if your income level is below the minimum level at which tax is collected or even if you did not work at all).

We ask this to determine your eligibility for Bona Fide Resident status.

Account Type

Bank Account - Checking or Saving account, Certificate of Deposit with a bank.

  • Investment Account - contains stocks, bonds, options, futures and other derivative instruments held in your name by a financial institution.
  • Business Account - bank account of a non-US business entity (corporation or partnership) in which you own more than 10% ownership interest.
  • Insurance / Annuity - foreign-issued life insurance or annuity contract with a cash value.
  • Retirement Plan - balance on the employer-provided or self-managed foreign pension plans. Plans that do not have a balance (called defined benefits plans) do not need to be reported. Examples of defined benefits plans include Australian Superannuation, Survivor benefits, most plans earned by working for the Government.
  • Grantor Trust - Foreign trust is a grantor trust if it meets one of the two conditions: 
    • 1) The U.S. grant owner (aka settlor, grantor, trustor) reserves the right to revoke the trust and take over the trust assets OR
    •  2) Distributions from the foreign trust, while the trust owner is alive, go ONLY to yourself and/or to your spouse

Please note - if two account types (for example bank account and investment account) share the same number, you can report it once and pick whichever account type you want.

Did you receive a stipend or fellowship grant?

A stipend is a form of salaries, such as for an internship or apprenticeship. Some University Graduate Schools make stipend payments to help students have the time and funds to earn their academic degree.

A fellowship grant is generally an amount paid or allowed to an individual for the purpose of study or research. 

Did you make contributions to the local country Social Security system during the tax year?

Please answer  YES regardless of whether contributions were automatically deducted from your paycheck or you made them yourself manually. Whichever way the contributions were made - the answer should be YES.

Below is the list of how various countries call their Social Security systems. If your country is not on the list and you are not sure - ask us.

  • Australia  - if you are Self-Employed and make contributions to the Superannuation Fund - please answer YES. Those contributions will make you exempt from the requirement to make contributions to U.S. Social Security. If you are a salaried employee - please answer NO. For you, it's just a non-deductible contribution to employee pension.
  • France - Sécurité sociale
  • Germany - Sozialversicherungsträger
  • Japan - Social Insurance
  • Korea - National Pension
  • Netherlands - Sociale zekerheid
  • New Zealand - Superannuation Fund
  • Norway - Trygdesystemet
  • Singapore - Central Provident Fund
  • Spain - Seguridad Social
  • Sweden - Sociala trygghetssystem
  • Switzerland - Pillar 1
  • United Kingdom - National Insurance

Original Purchase Price of the Sold Home

Please provide the   original price that you paid for the house (not the current fair market value or a value at which you might have refinanced the mortgage).

If you paid separately for the house and the land (or for example for leasehold and then purchased freehold separately) - please add both values together (and provide details in the comment).

If you received the house as a gift or inheritance - you should report the sale the same way you would report the sale of a purchased. The cost basis for the gifted/inherited property is the original cost basis (purchase price your giftee paid for the house).

In your answer to the question Original Purchase Price of the Sold Home - leave a comment by clicking the Pencil icon and write the word "gift".

You can also include additional expenses incurred during the home purchase.

Examples of purchase expenses you can deduct upon the sale of the home. These expenses increase the value of the home and reduce the amount of profit realized upon the sale of the home. They include:

  • legal fees to obtain title to the home
  • title search fees
  • title insurance
  • title recording fees
  • transfer taxes, and
  • survey fees

Did you receive any dividend income during the filing year?

Dividend - is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders. Dividends can be issued as cash payments, like shares of stock, or other property.

For more details and a video explanation please see the Investopedia article.

Please note that if you sell a stock or Mutual Fund for profit that's not a dividend (but rather capital gains)

Did you receive cash or property distribution from a Trust (whether US or Foreign)?

If you don't know what is a trust (or are unsure if one is giving you money) -  most likely you did not receive distributions from one.

In case you still want to know:

Trust - a fiduciary relationship in which one party, known as a trustor, gives another party, the trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary. A family trust is an example of such fiduciary relationship. The source of trust assets can come from the inheritance or be funded by live individuals.

Country & Pension Type (Social Security, via employer or individual pension plan)

This question applies to all kinds of pension plans - Social Security, employer or individual pension plans.

Amount of rent received during the tax year

If you only own a share of the rental property:

Please report the full amount of rental income and your ownership share in the property.

Both rent and expenses will be prorated on the return (i.e. we will calculate your share).

We need this information because we have to report both the full rental amount charged as well as your personal share of the property to the IRS. The reason for doing so: if we only report a portion of the rental income on the return, it may look like rental below the market value (expenses not allowed for deduction) - which will cause problems with the IRS.

Auto & Travel Expenses

You can deduct your auto and travel expenses only when they were incurred to visit the rental property for management purposes.

Here is a more thorough outline of what “Auto & Travel” expenses are  deductible in connection with your rental property:

  • First of all, in order to deduct the cost of your trip (plane ticket, transportation expenses, lodging etc.) the purpose of the trip must be primarily for your rental ­activity. If your trip is primarily a vacation—that is, you spend more than half of your time on personal activities—the entire cost of the trip is a nondeductible personal expense.
  • As long as your trip is primarily for your rental activity, then you would be able to deduct the cost of transportation and other necessary expenses directly connected with the rental activity (plane ticket, transportation expenses, lodging etc.).
  • Deductible auto expenses can consist of either actual expenses (gas etc.) or by using the standard mileage rate (for 2018: 54.5 cents per mile for business miles driven).

The IRS closely scrutinizes “Auto & Travel” expenses and it is extremely important to properly document all these types of business (rental property) deductions.

U.S. Dividends in $

U.S. Dividends refer to all dividends paid out from a   U.S. securities account.

You only have to answer this question if you received dividends from a US brokerage account. If you did, you should have received a 1099-Div to report them. If not, leave this section of the questionnaire blank.

Which companies issue them (domestic or foreign companies) does not make any difference.

Please report what is shown on the form. It does not make a difference whether the dividends were cashed out or reinvested. They are taxed upon dividends  distribution in either case.

Do not report interest or dividends earned in the Traditional or ROTH IRA.

Select your Refund method

We can provide your U.S. bank details on the tax return - the IRS would then be able to do a direct deposit of your refund.

If you don't have a U.S. bank, please select the other option - then the IRS will send you a check. Unfortunately, refunds can be electronically deposited only into a US bank account.

Did you incur higher education expenses for yourself, spouse or dependents (college and beyond)

They may be used as a deduction for all US-accredited universities and some foreign universities -  we will determine if it is.

Please note - professional education required by your professional license or condition to current employment does not qualify.

Also - school accommodation is not an expense qualified for deduction.

You can only claim the amount reported on form 1098T - whatever your school reported as qualified tuition cost.

If you did incur work-related educational expenses, please list them under Other Expenses (at the bottom of the Deductions tab).

You can deduct your dependent's tuition as long as they are dependent on YOUR tax return even if they file their own 1040EZ form (but they should not claim a personal exemption or you won't be able to list her as a dependent).

Currency to check 

You can indicate monetary figures in your local currency. Either select the currency from the dropdown or pick OTHER if your currency is not listed and the system will ask you to type its name.

We would convert to USD for you. Alternatively, you can convert to USD - for official FX rates please see  Historical FX Rates

Different tax calendar

If your resident country uses a different tax calendar (for example Apr 1 - Mar 31), you can do   either of the following to reconcile income earned during two tax periods to the 12 months we ask for:

  • Ask your employer to provide a calendar year-based statement
  • Multiply your monthly salary by 12 (if it was steady through 2 years)
  • Annualize income based on the 2 consecutive tax declarations: take 1/4 of wages shown on prior-year declaration (this will be your income for Jan/March) and add 3/4 of wages shown on the current year declaration (this will be your income for April/December)

Pension contributions reporting

If a part of your gross salary went to the pension contributions then it depends on where you live for the purposes of reporting:

If you live in a country where pension contributions are allowed for deferral by Tax Treaty (UK, Germany, Belgium, Netherlands) then you report gross pay after contributions.

For   all other countries, you should report the gross amount before pension contributions.

Do you have a mortgage on the residence in which you live?

This applies to the mortgage on any property that you own but do not rent out. It may be a U.S. or foreign mortgage. 

If you have a mortgage on other homes (which you rent out), please provide details about them in the Passive Income > Rentals tab.

If you bought or sold the property in the middle of the year - please provide mortgage interest paid for the duration when you were paying it.

Please note - only the person(s) listed on the mortgage can deduct mortgage interest. If you are paying off someone else's mortgage (and it's in someone else's name) - you can not deduct it.

Did the account earn ANY income (such as interest or dividends) during the tax year?

There is no minimum required to answer this question.

Any amount of income earned requires you to answer it with a  YES.

Please note - even if the account may be treated as a tax-deferred investment in your country, it may not be considered as such by the IRS from their perspective. Therefore - please report the account and interest and we will determine whether it is taxable and should be reported on FBAR.

Address of Property #1

Please report any rental property you own worldwide. Report the total value of the property and the percentage of your ownership. 

Was form 5471 filed on your behalf by another U.S. officer/director of this foreign corporation?

Form 5471 may be filed only once - provided it includes information on ALL US shareholders with at least 10% ownership.

If somebody else filed form 5471 on your behalf, we would need to see its copy.

Did receive any interest income during the filing year?

Interest income is defined as money that is paid in exchange for borrowing or using another person's or organization's money. Interest is calculated as a percentage of the money borrowed.

The simplest kind of interest is if you have a bank account - the bank will pay you some percent for the privilege of holding your money.

For example, you have $1,000 in a bank account and the interest rate is 1%, the bank will give you $10 per year as interest. This is what this question is asking for.

Investment expenses

Here’s a list of investment-related expenses that you may be able to deduct:

  • Fees for investment counsel and advice, including subscriptions to financial publications
  • IRA or Keogh custodial fees, if paid by cash outside the account
  • Software or online services you use to manage your investments
  • Safe-deposit box rent, if you use the box to store certificates or investment-related documents
  • Transportation to your broker’s or investment adviser’s office
  • Attorney, accounting or clerical costs necessary to produce or collect taxable income
  • Charges for automatic investment services and dividend reinvestment plans
  • Costs to replace lost security certificates

Investment-related expenses that can't be deducted include:

  • Trading commissions — these are "capitalized" to increase your cost basis and/or reduce your taxable sales proceeds
  • Costs of traveling to attend a shareholder’s meeting
  • Investment advisory fees related to tax-exempt income — you generally need to prorate these fees based on the portion of tax-exempt investment income versus total taxable investment income
  • Borrowing costs associated with life insurance

For more details please see Tax-deductible investment expenses.

Please provide details of assets sold during the filing year

When you buy a stock or other securities, the amount you pay for it is your cost basis. Then - when you sell the stock, the amount you receive is included in income, less your cost basis, so you only pay tax on the value gained while you held the stock.

More formally - the cost basis of any investment is the original value of an asset adjusted for stock splits, dividends, and capital distributions. It is used to calculate the capital gain or loss on investment for tax purposes.

For more details please see:

Did you earn any sort of income from the US during the tax year?

Please note that this refers to earned income (meaning you worked for it).

For all items of other income (such as rental income or interest/dividends) - please complete the top-level tab  Passive Income.

Did you receive US Forms 1095-A / B / C?

This question is related to the recently passed Obamacare (ACA) law in the US - which requires all U.S. residents to have health insurance.

If you (along with your wife and children) do not live in the US - it doesn't apply to you and you can ignore it.

If you have foreign insurance - please do not upload supporting documents for the foreign health insurance coverage (we don't need it).

If you live in the US - you would demonstrate having health insurance by one of these forms:

  • Form 1095-A (Health Insurance Marketplace Statement)
  • Form 1095-B (Health Coverage)
  • Form 1095-C (Employer-Provided Health Insurance Offer and Coverage)

Please note:

  • The forms are issued either by your employer, individual health insurance company, or other entity that issued health insurance. The form indicates who issued it.
  • The penalty for failure to have health care coverage is applied to all taxpayers by default. In order to get an exemption we would have to demonstrate that you live abroad (either by the Physical Presence Test or the Bona Fide Residence Test) or by giving IRS details from your Form 1095.
  • If you or members of your household live in the US and you are not able to provide the Form 1095, the IRS will deem you or them as not having health insurance and apply the penalty. There is no way to avoid this.

For 2014 tax year forms 1095-b for health insurance companies are optional. For 2014 we report coverage based on information that you provide us.

The current IRS position is: Forms 1094-B and 1095-B are not required to be filed for 2014. However, in preparation for the first required filing of these forms (that is, filing in 2016 for 2015), reporting entities may, if they wish, voluntarily file in 2015 for 2014 in accordance with the forms and these instructions. 

Did you pay any US tax in the calendar tax year?

Please note that regardless of whether taxes were automatically deducted from your salary or you made the payment yourself - you should answer this question with a  YES.

If you made estimated payments to the IRS, they should be disclosed in the question on the TQ

Tax preparation fees (for the previous year)

You can include both US and foreign tax preparation fees - just indicate which is which. Preparation of FBAR can also be included. If we prepared your last year's return, you can certainly include it. If you had a Phone Consultation with TFX, its cost can be included.

If a deduction for tax preparation fees can be applied (we will determine this in the course of preparing your return) then these fees can be deducted.

What was the last year for which you filed a State Tax return?

This is only needed if you filed  in the last three years. I.e. If you filed your last state tax return before 2012, you don't have to provide it.

Previous year's returns may help improve your tax position for the current year.

Please note: A state tax return is the tax form or forms used to report income and file income taxes with state tax authorities in the United States. Tax returns allow taxpayers to calculate their tax liability and remit payments or request refunds. 

Did you pay Interest on Student Loans

Please note - this can be used to reduce your taxable income.

You can only deduct interest for the student loan issued in your name (or either spouse if you file a joint return), for which you signed a promissory note. The loan that you repay for anyone else (even spouse or child) does not qualify you for deduction.

Note that student loan interest is deductible only if the loan is taken to pay tuition at a  qualified educational institution. Eligible educational institution. An eligible educational institution is any postsecondary educational institution eligible to participate in a student aid program administered by the U.S. Department of Education.

If you have an unpaid outstanding debt on a student loan then you can not deduct interest accumulating on the account.

Note that the IRS will apply any refund that you may receive towards the outstanding debt.

Notes

From Form 1099-INT

Moving expenses

Please note - moving expenses unrelated to an actual job change are not deductible. To qualify for the deduction, moving expenses should meet the distance test:  Your new principal workplace must be at least 50 miles farther from your old home than your old workplace.

You can deduct moving expenses unrelated to the new job only if you moved back to the United States. Otherwise, deductible moving expenses need to be related to job-related relocation. I.e. if you move without having a new job, the IRS considers you not to have a workplace at the new home, thus making you ineligible for the deduction.

You can deduct the cost of transportation of your personal belongings to the new place of work and your personal transportation costs.

The unpaid help of friends and neighbors is not deductible and should not be reported.

Please only list UBREIMBURSED expenses (i.e. if you were already reimbursed for them by your company - you can't double-count them).

In general, the IRS allows only Reasonable expenses.

You can deduct only those expenses that are reasonable for the circumstances of your move. For example, the cost of traveling from your former home to your new one should be by the shortest, most direct route available by conventional transportation. If during your trip to your new home, you stop over or make side trips for sightseeing, the additional expenses for your stopover or side trips are not deductible as moving expenses.

For more details please see Moving Expenses at IRS

Sale Price (Gross)

If you are a partial owner, report the entire amount of sale and your percentage of ownership in the question comment (by clicking on the pencil icon). 

What was the last year for which you filed U.S. Federal tax return?

We need this to determine what years you are obligated to file your tax returns.

If you filed a joint US return with your spouse, this counts as your own U.S return filing (even if you had no income).

If we are completing a multi-year project for you, please indicate the last year prior you filed a US tax return to whichever return we are completing  as your first year. For example - if we are doing 2014-2016 and you last filed the return in 2015, please answer 2015.

During the filing calendar year, did you receive compensation (wages or self-employment), either in the US or abroad)?

Please answer Yes if:

  • You earned any kind of income during the tax year (most likely scenario) OR
  • You received compensation for work you had performed earlier - for example, a stock or options grant that vested during this tax year.

In simple terms - did you get paid during the tax year?   There is one exception - if you own your own company, please report dividends paid to yourself by your company as you report other dividends - via the Passive Income tab, indicating the source (your company name).  

Please note - if you were given any kind of  deferred compensation (for example unvested shares or stock grant contingent on future performance), it does not have to be reported during the tax year of issuance.   

But you  will have to report it in the tax year when the restriction is removed (ie shares vest, etc).  For all items of other income (such as pension, rental income, capital gains, interest or dividends) - please go to the top-level tab Passive Income.

Did you own residential real estate during the tax year?

Please note - if:

  • You are married
  • You are filing separately from your spouse
  • Your name does not show up on the deed of the property

then you have to report ownership of the property depending on the laws of the country you reside in. Property acquired during the marriage can be considered under either community property (jointly owned) regime or separation of property (owned separately by each spouse) regime.

If community property, then all assets remain jointly owned regardless of the title and must be reported.

Some countries (for example Germany) allow the choice of property ownership regimes. This means assets acquired during the marriage can be owned either jointly or separately and you have the choice of reporting or not the property that is solely owned by your spouse.

Although timeshare can be sold, it’s only a transfer of the right to use the deed and is not considered a tangible asset. Therefore, if you only own a timeshare the answer should be NO.

If you rent it out for less than 2 weeks, that income is tax-free but the losses are not allowed for deduction.

Medical and dental expenses/insurance premiums

These may be used to decrease your taxable income if your medical/dental expenses are unusually high.

Foreign (i.e. non-US) health expenses do qualify.

Please note that contributions to  a government health insurance system (such as the NHS in the UK) do not qualify.

Charitable contributions to U.S. or foreign qualified organizations (Canadian, Mexican, or Israeli)

This can be used to reduce taxable income.

Please provide the charity name and the amount you contributed.

Please see Tax Exempt Organization Search for the full list of qualified charities.

Charities to a church qualify if the church or temple is located in the U.S., Canada, Mexico or Israel. If the temple is located outside of those countries then the donation is not deductible in the U.S.

If cash donation is made to the qualified charity then donation exceeding $250 must have a proof - not necessarily a receipt but at least a "thank you" email from the charity. Preferably with the amount for which they say thank you.

Utilities

Please include utilities for the whole year and we will prorate them to the number of total rental days. 

You can list both utilities paid by yourself and the tenant - just list them separately (you can use the pencil icon to provide extra comments).

Did you make Estimated Tax Payments to the IRS or any U.S. State?

Please note - this question refers to the advance payments you made   to the IRS for the year you are filing. It is not the salary withholding and not the foreign tax payments. Those are your own payments sent voluntarily to the IRS to be applied towards your future tax obligations.

We will apply this as prepayments on your tax due.

Did you pay property taxes on the residence in which you live and own?

If you have other homes (which you rent out), please provide details about them in the Passive Income > Rentals Tab.

If you are paying property taxes on different levels (for example City and Regional councils) - you can list both of them. I.e. any taxes that are appraised against the value of the property (  as long as you are the owner) can be provided here.

This refers to properties both in the US and abroad that you may own.

Please note - property taxes will increment the amount of other claimed deductions if you itemize deductions. If you use standard deduction then property tax will not affect the number of deductions.

What does this mean?

The taxpayer has a choice of either claiming fixed amount of deductions (  Standard Deductions) or claiming each deduction separately (Itemized Deductions).  Property taxes will increment the amount of other claimed deductions if you choose to itemize. 

The Standard Deductions amount depends only on the filing status (from $12,000 through $24,000 for the 2018 tax year, annually adjusted for inflation). The choice between the two methods depends on how much you can deduct by using the more complex method, itemizing. As a matter of fact, more than a half of taxpayers benefit from Standard deductions because by itemizing they would not exceed the standard deduction amount. Additional benefits: no need to keep records, and risk of random IRS audit significantly lower.

Itemized deductions are worthwhile if the taxpayer paid U.S. state income tax or mortgage interest on personal (not rented) property. Then miscellaneous other deductions, such as charitable contributions, medical expenses, gambling losses - being added to the major deductions, resulting in a higher amount than standard deductions.

All expenses related to income production from rental property or business activity cannot be claimed as a part of personal itemized deductions. Those deductions are claimed the respective rental or business schedules. Please note that various personal expenses deductible in your resident country (i.e. commuting expenses, burial expenses, home repair, fees, and licenses) are not allowed to be claimed as a part of itemized deductions.

We assess the potential benefit you may derive by using one or other method and suggest deductions type optimal for your situation.

U.S. Interest Income

Please indicate interest earned from United States accounts (such as bank savings, etc).

Only include accounts in which you have a financial interest.

According to IRS regulations, there is   no minimum amount that must be reported.

Did you rent out a property during the filing year?

Please note that this question refers to rental properties anywhere in the world that you might derive income from.

If you pay property tax on joint property - who will deduct tax?

Property tax is a tax assessed on real estate. The tax is usually based on the value of the property (including the land) you own and is often assessed by local or municipal governments.

Cost of Land included in Purchase Price

If you don't know the breakdown between the cost of the house and then land, please select  Do Not Know.

We ask this because the basis for house depreciation deduction does not include the cost of land. 

Please list any other item(s) of income or expense that you feel might affect your U.S. taxes, or anything else you feel might affect your U.S. income taxes

We will determine if these are deductible or not

Do you have an HSA account?

A Health Savings Account (HSA) - is a tax-exempt account set up with an IRS-qualified HSA trustee to pay or reimburse certain medical expenses you incur. 

What is your ownership percentage in the rental property?

If owned by husband and wife filing jointly then report 100%.

Otherwise please indicate the percentage ownership of the person filing the tax return.

We need this information because we have to report both the full rental amount charged as well as your personal share of the property to the IRS. The reason for doing so: if we only report a portion of the rental income on the return, it may look like rental below the market value (expenses not allowed for deduction) - which will cause problems with the IRS.

Improvements to Home Sold

Include the total amount for ALL improvements made since home purchase.

Did you pay personal income tax on your self-employment income during filing tax year (separate from Social Security)?

Please note that every type of tax - including a tax on self-employment income - is reported on a "cash basis".

This means that you report tax actually paid on this type of income within the period from Jan 1 through Dec 31 - whether this is tax paid on prior year income or current year income.

Did anyone live in your U.S. residence during the filing year?

You may be required to report rental income.

Please list their names

This is required by the IRS.

It is enough to include one family member living with you abroad. The IRS wants to know if you have any family ties while living abroad. May be close or distant family.

Do you plan to include any self-prepared forms with your return?

By self-prepared forms, we mean any forms that you intend to prepare and file on your own, without our involvement.

While we do not recommend this, we allow for it - but we will ask that you sign a waiver absolving us of responsibility in case you do it wrong.

If you don't plan to file any forms that you will prepare yourself (without our involvement), please answer  NO to this question.

Did you receive royalties, unemployment payments or other miscellaneous income from a U.S. source?

This is all reportable, taxable income.

Purchase price

This question asks about the original purchase price of the property.

The purchase price is the price of the house net of taxes, fees, and other closing costs.

If you paid separately for  leasehold and freehold, please indicate freehold cost in the next question (price of land).

For inherited property provide Fair Market Value at the time of inheritance receipt in lieu of Purchase price.

If you have refinanced it at a later date, that value makes no difference and should not be reported.

Please report any rental property you own worldwide. Report the total value of the property and percentage of your ownership. 

Even though Schedule E does not request purchase price but Depreciation schedule does. In order to calculate depreciation deduction, we need to know the purchase price. 

Do you have a canceled debt that you did not pay back?

If you have canceled debt - you received IRS form 1099-C or 1099-A. I.e.  if you were not provided with this form, you don't have to worry about it.

Was the account opened during the tax year?

Please answer YES if the account was opened during the tax year for which you are filing.

Royalties Received

This is the section where you can report royalties from oil, gas, or mineral properties that you received from the property.

Was the account closed during the tax year?

Please answer YES if the account was closed during the tax year for which you reporting.

Please note - you have to report the account if it was opened at any point during the year, regardless for how long.

Did you carry out sales of securities with a US financial institution?

Example of such a transaction would be the sale of stocks or bonds. You do not have to list the purchases you made.

Please note - if you had a bond that matured during the year, you  do not have to report the event (bond redemption) - provided that you had reported interest you've earned annually.

You should not describe the transactions you made with a pension plan (such as 401K or IRA) in this question.

This information is reported to the IRS by your broker.  Your tax return needs to match the data they submit.

Expenses of Sale

You can report all fees listed on the closing agreement (such as realtor fee, etc).

Did you deduct expenses for the business of your home?

If you rented an office for yourself, please report it as an Office Expense. DO NOT answer Yes to this question. It only refers to use of the home office.

Taxes Paid (do not include any tax paid by the tenant)

Please report taxes paid for the full year. We ask how many days the unit was rented in a separate question and will prorate the expenses for you.

Property taxes are imposed on the property based on the property value. Tax on rental proceeds is based on your personal income. Respectively, those two types will be reported separately.

Please list every type of tax levied because of this property and indicate the type. Separate property taxes from income tax imposed on you based on rental income. If you need more space than available, please provide details by clicking on the Pencil Icon.

Repairs

This includes regular maintenance as well as between-tenancy large repairs (eg new bathroom fittings/carpets/extractors/  repaint).

There is no monetary threshold for itemizing repairs. Use your judgment and clarify major expenses. Keep receipts for all repairs - big and small.

Did you pay a Wealth Tax (ie tax on assets and not income)?

Some countries, such as France, tax your assets.

For example - below are the French rates of taxation applicable for 2013. So if you had $5mio in the bank, you would have paid $62,500 tax on that amount as the wealth tax.

Fraction Taxable Rate of Tax
€0 - €800,000 0%
€800,000 - €1,300,000 0.50%
€1,300,000 - €2,570,000 0.70%
€2,570,000 - €5,000,000 1%
€5,000,000 - €10,000,000 1.25%
€10,000,000+ 1.50%

Date when rental started

Please note - this is the date when the united is listed for rent (and   not the date when tenants actually moved in).

Provide the actual date - even if it is before the tax year you are filing.

Property is considered placed in a rental activity when it is ready and available for rent, even if you are not having tenants in it yet.

Supplies

Supplies and materials necessary to conduct rental activity refer to office supplies used to keep records (i.e. paper, ink toner) as well as building supplies for repair (i.e. paint, brushes, tiles, etc.) - if not included in the cost of repair reported separately.

Number of days rented (365 if full year)

This is the number of days the property was  available for rent. Do not count days it was used by you personally.

For example, if you used the property yourself for 10 days of the year, the answer should be 355.

Number of Personal Use Days (if you used the property yourself)

"Personal use days" are the days when you actually  resided in the property while it was not rented (before, after or between the period when it was occupied by tenants).

Date of Sale (Date of Completion in the UK)

Date of sale should be the same as that which is legally considered in the resident country.

Did you donate a vehicle, boat or airplane with the claimed value over $500

This can be used to reduce your taxable income

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