Resident in USA for but Have Rental Income in AU - Tax Help

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  nicolemcmilllon on 28/10/2019 - 08:44

  +1

  You have to do a tax return in Australia every year. For the first year you will get a pro rata tax free threshold.

  In subsequent years, you will be taxed from your first dollar so its important to continue to do Australian tax returns and account for these losses in the early years for when the property is positively geared in the future.

  :)

  • 

    rickyb on 28/10/2019 - 08:51

    Thank you Nicole :)

    So let's say I'm taxed from the first dollar and make a loss of 10k each year for the next 4 years. Is there something I should do to be tax efficient to utilise these losses?

    • 

      nicolemcmilllon on 28/10/2019 - 09:00

      By doing your tax returns you will be carrying forward these losses.

      First year will be diff as you will be a resident for part of the year so you should discuss this with your accountant on the date you leave Aus.

      • 

        rickyb on 28/10/2019 - 09:01

        Thank you!

• 

  RockyRaccoon on 28/10/2019 - 09:10

  +1

  You will also have to declare that income in the US, both for tax via Federal and State that you live in.

  While income from Australia will be included as income in the US, Tax paid here will be deductable.

  Of course that's simple, its a little more complex, hopefully you negotiated a package where the employer pays for tax return assistance

  BTW working in the US means you may be able to access your Social Security on retirement (66) even when you return. Thats even if you have too many assets for the Australian Pension.

  We have reciprocal Social Security/Pension agreements with the US which means you dont need to be in the US for the mandatory 40 credits (Max 4 for each year = 10 years of input), Australian work time is counted towards this requirement.

  • 

    rickyb on 28/10/2019 - 09:17

    Thank you Rocky. So in this example of 20k in, 30k out per year (i.e. 10k loss), in Australia if this was my only income I'd be paying no tax since I'm -10k. If I'm earning an average salary in the US, do they include only the rental income of 20k and not consider the 30k in interest (etc.) losses?

    • 

      RockyRaccoon on 28/10/2019 - 09:28

      Its a little more complex, and its been a long time since I was caught in the dual tax system. On Wiki pedia they make this statement

      United States
      In principle, the US federal tax does not allow the transfer of income streams.[23] In general, taxpayers can only deduct expenses of renting property from their rental income, as renting property out is usually considered a passive activity. However, if renters are considered to have actively participated in the activities, they can claim deductions from rental losses against their other "nonpassive income".[24] A definition of "active participation" is outlined in the "Reporting Rental Income, Expenses, and Losses" guide:[24]

      You actively participated in a rental real estate activity if you (and your spouse) owned at least 10% of the rental property and you made management decisions or arranged for others to provide services (such as repairs) in a significant and bona fide sense. Management decisions that may count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and other similar decisions.

      It is possible deduct any loss against other incomes, depending on a range of factors.[25]

      Look here for links to the notes [23, 24 25]

      https://en.wikipedia.org/wiki/Negative_gearing#United_States

      Also there are different rules for State and Federal Tax filings, so something deductable/chargeable at Federal may not be available for State and vice versa

      And some states have quite high income taxes.

      https://en.wikipedia.org/wiki/State_income_tax#/media/File:T…

      • 

        rickyb on 28/10/2019 - 09:40

        I see. This is quite complicated. Thank you for the pointers.

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  bargainr on 28/10/2019 - 12:30

  Pm me. You will need an accountant familiar with both tax systems.