A question on taxation

[aquaman]

For other property owners who rent out their places. Do you declare the income annually here in Aruba as well as your home country?

Canada has a tax treaty with Aruba, whereby if you declare in either Canada or Aruba you only need to have reported it to one country. I am now being told that income generated in Aruba must now be reported here as well. Has anyone else experienced this?

[Aruba4ever]

You rent out the home for 15 or more days and use it for fewer than 14 days or 10% of the total days it was rented. In this case, the IRS considers the home to be rental property, and the rental activities are viewed as a business.7

Keep in mind: If a member of your family uses the house (e.g., your spouse, siblings, parents, grandparents, children, and grandchildren), then it counts as a personal day unless you collect a fair rental price. You must report all rental income to the IRS, but the good news is that this permits you to deduct rental expenses, such as mortgage interest, foreign property taxes, advertising expenses, insurance premiums, utilities, and fees paid to property managers. One notable difference between a rental property at home and one abroad: Your property abroad is depreciated over a 40-year period, instead of the current 27.5 years for domestic residential properties.2 In either case, you depreciate the value of the structure (the building) only; the land is not depreciable

Double Taxation

If you operate your home abroad as a rental property, then you may owe taxes in the country where the property is located. To prevent double taxation, you can take a tax credit on your U.S. tax return for any taxes you paid to the foreign country relating to the net rental income. There is a maximum allowable tax credit, however: You can’t take a credit for more than the amount of U.S. tax on the rental income, after deducting expenses.11

In addition to taking a tax credit for any rental income taxes paid, you can also claim a foreign tax credit if you sell the property and pay capital gains tax in the foreign country.11

[ArubaAngela]

I was going to ask this question also, but I live in the US. So I report my rental income to the IRS, do I have to report anything in Aruba?? I just started renting my property this past May (we closed in May 2020). I paid cash for my condo, but have a mortgage here in the US. Not sure what can be deducted?? Can I use the cost for furnishing, etc.

[schexc]

I was going to ask this question also, but I live in the US. So I report my rental income to the IRS, do I have to report anything in Aruba?? I just started renting my property this past May (we closed in May 2020). I paid cash for my condo, but have a mortgage here in the US. Not sure what can be deducted?? Can I use the cost for furnishing, etc.

We also rent and report our income to the IRS. There is reciprocity between the USA and Aruba, but that does not answer your question on required tax filing to Aruba. Our CPA tried to look into it for us a few years ago and never found a definitive answer so we currently only file to the IRS. Our real estate agent at the time told us no and then followed up with there's no oversight. I suppose you'd have to talk to a tax attorney/accountant on the island to get a straight answer...hopefully.

Allowable deductions for rental property are different then for a second home. Your account should be able to explain what is and isn't allowable. Also, you're deductions can not exceed a $0.00 threshold, but you can carry the deductible amount over to the following tax year. At least that is my very basic understanding of the tax codes, which is always subject to change...

[Aruba4ever]

99 percent sure when I looked into this earlier I found out I was responsible for Aruba and USA taxes on rental income. I think its likely not to be "caught" but pretty sure you are responsible for taxes in Aruba- jmho

We also rent and report our income to the IRS. There is reciprocity between the USA and Aruba, but that does not answer your question on required tax filing to Aruba. Our CPA tried to look into it for us a few years ago and never found a definitive answer so we currently only file to the IRS. Our real estate agent at the time told us no and then followed up with there's no enforcement. I suppose you'd have to talk to a tax attorney/accountant on the island to get a straight answer...hopefully.

Allowable deductions for rental property are different then for a second home. Your account should be able to explain what is and isn't allowable. Also, you're deductions can not exceed a $0.00 threshold, but you can carry the deductible amount over to the following tax year. At least that is my very basic understanding of the tax codes, which is always subject to change...

[annf]

Good questions. When renting out your Aruba unit you are responsible for the rental tax Aruba charges. If you are working with an agency I would presume they handle those taxes for you. If working on your own you are suppose to charge and pay the tax to the government. (I believe that is the current requirement)

[Kent-ArubaBob]

When I had Aruba Bob Snorkeling, I had to report income to Aruba and also to the US. Whatever you pay in Aruba will taken off your US taxes.