So we are considering buying a flat in my wife's native Sao Paulo, Brazil. Reason being is that I would like to summer down there, I've never really been a fan of the weather here in Texas in the summertime, being a native of the wet side of Oregon. And the "wintertime" down there in Brazil is pretty nice, we spent the entire month of June 2022 down there and I really enjoyed it. We also make quite a few shorter trips down there and it would be nice to have our own space, staying with relatives is acceptable and cheap but it would just be nicer on the whole to have our own place. Our trip in November, the weather was a bit unpleasant at times because my wife's cousin does not have AC and southern Spring in Sao Paulo is actually the hot season, the summer is actually cooler because of the frequency of thunderstorms and rain. Of course for us, a property having AC would be a hard requirement because we are used to it.
I'm not too concerned about the care and feeding of the property, as my wife has a large extended family in the area and she has dual Brazilian/USA citizenship. We also have access to well-vetted cheap (by US standards) labor down there through my wife's family network so getting someone to come in and clean and do make ready during the 9 months of the year we are not there should be fairly easy to accomplish. Likewise my wife lived the first 37 years of her life there and I have made quite a few trips down there now in the 6+ years we have been married, so we are pretty well informed about the desirable locations and the security situation and so forth and so on. The local property taxes down there are also a pittance compared to what we pay here in Texas, so that's not really too much of a concern.
I'm actually less informed about what property ownership abroad would mean in the USA from a tax perspective, as until recently I have never even considered it. For our purposes this will be an investment property that we live in part of the year. I assume that if we AirBNB the property while in the USA for the other 9 months of the year, that income would be subject to US federal income taxes. And that if/when we sold the property down the road, that would be subject to capital gains taxes. But what about appreciation? I see from some Google searches that you can no longer deduct foreign rental property taxes from your US income taxes, although that said now the standard deduction is so high that I haven't itemized in a few years. It also seems that if you occupy the property for over 14 days a year and rent it out more than 15 days a year, you must report it as a secondary residence AND a rental property, at least per this H&R block chart:
www.hrblock.com
Besides the property taxes there's a lot of other stuff that is deductible, as shown at the link above. It does say costs must be converted into dollars, but it doesn't say based on what time period that must be done, obviously exchange rates fluctuate and I would like to get the most from my money so to say. I'd also prefer to keep the foreign expenses, well really all money dealings, in local currency where possible, we have investments down there already that we would probably cash out to make a downpayment on a property. Using the SWIFT international system to put larger sums of money down there is relatively expensive, as I found out when my wife had plastic surgery down there. Obtaining a mortgage in the USA is obviously not possible.
We are not in a hurry from a timeframe perspective as I cannot work abroad in my current occupation. However, at some point I will knock this off and look for another position that allows me to work in a dollar denominated occupation wherever I want, probably 3ish years from now, that is when we would look to make this move. For a good enough deal we may be willing to jump earlier. Some of the properties we looked at had list prices but the sales people encouraged us to make offers. As much as we complain in the USA about inflation and the economy post-Covid, times are worse in Brazil and I don't think they're selling a lot. We only looked at new properties, but may be willing to consider a resale at a good price with modern decor. For those of you who don't know, if you buy a new property, it doesn't come fitted out with kitchens and bathrooms, you must build them out.
What am I overlooking? Anyone got experience with owning properties abroad?
I'm not too concerned about the care and feeding of the property, as my wife has a large extended family in the area and she has dual Brazilian/USA citizenship. We also have access to well-vetted cheap (by US standards) labor down there through my wife's family network so getting someone to come in and clean and do make ready during the 9 months of the year we are not there should be fairly easy to accomplish. Likewise my wife lived the first 37 years of her life there and I have made quite a few trips down there now in the 6+ years we have been married, so we are pretty well informed about the desirable locations and the security situation and so forth and so on. The local property taxes down there are also a pittance compared to what we pay here in Texas, so that's not really too much of a concern.
I'm actually less informed about what property ownership abroad would mean in the USA from a tax perspective, as until recently I have never even considered it. For our purposes this will be an investment property that we live in part of the year. I assume that if we AirBNB the property while in the USA for the other 9 months of the year, that income would be subject to US federal income taxes. And that if/when we sold the property down the road, that would be subject to capital gains taxes. But what about appreciation? I see from some Google searches that you can no longer deduct foreign rental property taxes from your US income taxes, although that said now the standard deduction is so high that I haven't itemized in a few years. It also seems that if you occupy the property for over 14 days a year and rent it out more than 15 days a year, you must report it as a secondary residence AND a rental property, at least per this H&R block chart:
Reporting Foreign Rental Properties to the IRS
Learn more about the tax implications of buying property overseas, including foreign rental property depreciation, with the tax experts at H&R Block.
www.hrblock.com
Besides the property taxes there's a lot of other stuff that is deductible, as shown at the link above. It does say costs must be converted into dollars, but it doesn't say based on what time period that must be done, obviously exchange rates fluctuate and I would like to get the most from my money so to say. I'd also prefer to keep the foreign expenses, well really all money dealings, in local currency where possible, we have investments down there already that we would probably cash out to make a downpayment on a property. Using the SWIFT international system to put larger sums of money down there is relatively expensive, as I found out when my wife had plastic surgery down there. Obtaining a mortgage in the USA is obviously not possible.
We are not in a hurry from a timeframe perspective as I cannot work abroad in my current occupation. However, at some point I will knock this off and look for another position that allows me to work in a dollar denominated occupation wherever I want, probably 3ish years from now, that is when we would look to make this move. For a good enough deal we may be willing to jump earlier. Some of the properties we looked at had list prices but the sales people encouraged us to make offers. As much as we complain in the USA about inflation and the economy post-Covid, times are worse in Brazil and I don't think they're selling a lot. We only looked at new properties, but may be willing to consider a resale at a good price with modern decor. For those of you who don't know, if you buy a new property, it doesn't come fitted out with kitchens and bathrooms, you must build them out.
What am I overlooking? Anyone got experience with owning properties abroad?
