Have a Tax Question? Ask a Tax Expert
Hi and welcome to our site!Because you are a resident in the US - all your worldwide income is taxable.The tax treaty doesn't release you from reporting requirements - so you will need to report your rental income and rental expenses on your US tax return regardless if the property is located in the US or abroad.However - the tax treaty provides a relief from double taxation of the same income.
If the same income is taxable abroad and in the US - you may claim a credit for taxes paid abroad - so the same income would not be taxed twice. Use the form 1116 -http://www.irs.gov/pub/irs-pdf/f1116.pdf please find instructions here - http://www.irs.gov/pub/irs-pdf/f1116.pdfThe credit is limited by the US tax liability on the same income - the form 1116 is used to calculate the amount of credit. Means - if tax liability abroad is higher - there will not be US taxes on that income, but if tax liability abroad is lower - in the US you will pay the difference after the credit will be applied.