If you’re a U.S. citizen and don’t declare overseas property (or income from it), the IRS takes it seriously. Here’s what happens:
1. Owning the property itself
- Simply owning foreign real estate does not need to be reported.
- But if you hold it through a foreign corporation, partnership, or trust, then reporting rules kick in (Forms like 5471, 8865, or 3520).
2. Bank accounts tied to the property
- If you have a foreign bank account (e.g., for rent deposits, mortgage payments), and the total of all your foreign accounts goes over $10,000 at any time in a year, you must file an FBAR (FinCEN Form 114).
- Failing to file can bring huge penalties — up to $10,000 per non-willful violation or 50% of the account balance per year for willful violations.
3. Rental income or sale of property
- Any rental income or capital gain from selling the property must be reported to the IRS.
- Not reporting this is considered tax evasion, which can lead to back taxes, interest, civil penalties, and even criminal charges if it’s deliberate.
4. Foreign Asset Reporting (FATCA – Form 8938)
- If the total value of your foreign assets (including real estate held through foreign accounts/entities) is above certain thresholds (e.g., $50,000 for single filers), you may need to file Form 8938 with your tax return.
- Penalties for not filing: $10,000+ plus possible criminal consequences.
⚠️ Bottom line: Owning the property isn’t the problem — not reporting the money, accounts, or structures around it is. That’s what triggers IRS penalties.
Related
Does foreign property need to be reported to the IRS?
Do Americans pay tax on foreign property?
Will US banks give mortgages on foreign property?
Here’s a simple yes/no table for when U.S. citizens must report overseas property:
| Situation | Report to IRS? | How to Report |
|---|---|---|
| Just own foreign property in your name | ❌ No | Not required if only ownership. |
| Own property through a foreign corporation, trust, or partnership | ✅ Yes | Form 5471, 8865, or 3520 (depending on structure). |
| Have a foreign bank account tied to property (rent, mortgage, etc.) over $10,000 total | ✅ Yes | FBAR (FinCEN Form 114). |
| Rental income from foreign property | ✅ Yes | Report as rental income on U.S. tax return (Schedule E). |
| Sell foreign property and make a profit | ✅ Yes | Report capital gains on U.S. tax return (Schedule D). |
| Foreign financial assets tied to property exceed $50,000 (single) / $100,000 (married) | ✅ Yes | Form 8938 (FATCA). |
👉 In short: Owning alone = no report. Money or accounts connected to it = must report.