US tax implications on foreign investments

[Desut]

Hello everyone,

 

I know this question would be more suitable for an international tax professional but I figure to ask here first.

 

I am dual citizenship Thai and US and currently reside in the US and file taxes in the US. If I purchase an investment property in Thailand and rent it out continuously to a Thai business, and earn a monthly income, would I be liable for income taxes in the US? I think the answer would be yes since the US wants a piece of any kind of income you earn. 

 

I have a Thai bank account and all the transactions (purchase, rent payments, etc) would be in Thailand, but the initial money for the property purchase would be transferred from the US into my Thai bank account, so I don't think there would be any way to 'hide' this investment from the US IRS, not that I would try that anyhow.

 

Just seeking opinions from anyone who has done something similar. Thanks!

 

 

 

 

Edited May 20, 2022 by Desut

[TravelerEastWest]

Worldwide income for Americans is taxed except for exceptions such as earned income to a certain amount etc.

 

if the US Thai tax treaty has an exemption for your certain investment you would be OK.

[setbkk]

Yes, in theory you would be liable for US taxes. But from a practical standpoint there is little or no chance IRS would know of income. You transferred money to TH, but that does not mean the money was used for income producing assets. Audit risk slim to none, IRS would not chase after this, too overloaded going after big accounts.  BTW, if you have more than $10,000 USD  in foreign bank account, you need to file a FATCA report every year. Large penalties for not doing so. But FATCA filing does not necessarily imply you have income in TH, other than the minor amount of interest from bank account which should be reported.

[Qman]

2 hours ago, setbkk said:

Yes, in theory you would be liable for US taxes. But from a practical standpoint there is little or no chance IRS would know of income. You transferred money to TH, but that does not mean the money was used for income producing assets. Audit risk slim to none, IRS would not chase after this, too overloaded going after big accounts.  BTW, if you have more than $10,000 USD  in foreign bank account, you need to file a FATCA report every year. Large penalties for not doing so. But FATCA filing does not necessarily imply you have income in TH, other than the minor amount of interest from bank account which should be reported.

All taxpayers are required to file FBAR (bank accounts) which is done outside the tax return and FATCA which includes assets and is attached to your tax return.  This link discusses the key points of both.  Regarding the FBAR, all account owners must file so jointly owned accounts require a filing by each of the owners. 

https://www.jrviola.com/tax-news/fatca/2017/02/09/fbar-vs-fatca/

 

[1FinickyOne]

I am required for US tax filings to report the highest balance of the year from my Thai Bank Account and the amt of interest earned on that bank account...

 

I know that is not your situation but this may give you an idea. 

[Desut]

Thank you to everyone, these are some great answers and opinions that I was looking for. Very appreciated!

[Yellowtail]

Do not avoid declaring. 

 

As long as you are paying taxes in Thailand on the income in Thailand, you should get an exclusion on your US taxes, up to about $100K

 

That said, get a copy of TuroTax and run the numbers a few different ways and you should get a good feel for how it works and develop a decent level of confidence. 

 

If you set a company to buy and rent your property it likely will not make a lot of money anyway,