Dear Tax Talk,
I am planning to buy an investment property in Turkey. I am wondering whether Turkey and the U.S. have tax agreements, and whether my husband and I would be taxed twice for this rental property. We are both U.S. citizens, but I am also a citizen of Turkey.
— Turk

Dear Turk,
The United States maintains many tax treaties principally with European nations, including Turkey. Treaties are necessary to prevent double taxation on the same income. For a U.S. taxpayer, a treaty would modify the foreign taxation of income that is treated as from sources within the treaty partner country. Rents from real property are considered from sources within the country that the property is located. See article 6 of the Turkey tax treaty as it relates to immovable property. Hence, the rents could be taxed by Turkey just as a resident taxpayer of Turkey would be subject to tax. The treaty does not provide for reduction in taxes on rental income.

U.S. citizens and residents are subject to U.S. income tax on their worldwide income. Treaties do not reduce the U.S. taxes of U.S. citizens or residents. To avoid double taxation, the U.S. taxpayer would receive a credit for taxes paid to the other country. The income and the expenses of the Turkish rental property should be reported on Schedule E of Form 1040. Convert the income and expenses including income or other taxes into dollars at the prevailing exchange rate.

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