U.S. TAX GUIDE IN CHILE

Should I report to the IRS if I’m renting out property in Chile?

Yes. If you’re renting out a property in Chile—whether through Airbnb, as a vacation rental, or for long-term tenants—you need to report that rental income on your US tax return.

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As a US citizen or green card holder, the IRS expects you to report worldwide income, which includes rental income from properties outside the US.

What type of rental income needs to be reported?

Any money earned from renting out a property in Chile should be reported to the IRS. This means all rental payments received, whether it’s from long-term tenants or short-term vacationers, needs to be included on your US tax return. 

So, if you own a property in Chile, and you rent it out for a few weeks or months a year, you’ll need to report that income to the IRS.

Can I deduct expenses from rental income?

Yes, you can. The IRS allows you to deduct expenses related to your rental property. 

Common deductions include:

  • Property maintenance and repairs: Whether it’s a leaky roof or broken plumbing, you can deduct repair costs.
  • Utilities: If you pay for utilities like electricity, water, or internet for your rental, these can be deducted.
  • Property management fees: If you hire a manager or management company to take care of the property, their fees are deductible.
  • Mortgage interest: If you’re paying a mortgage on the property, the interest is deductible (but not the principal payments).
  • Insurance: Any insurance premiums on the property can also be deducted.


These deductions reduce your taxable rental income, making your tax bill smaller. Make sure you keep receipts and records of all these expenses throughout the year.

How does depreciation work?

The IRS also allows property owners to claim depreciation on rental properties. 

This means that even though your property might actually increase in value, the IRS lets you deduct a portion of the property’s cost each year, assuming it’s wearing down over time.

Here’s how it works:

  1. Determine the cost basis of the property (the value of the property when it was first converted to a rental).
  2. Calculate how long the IRS allows you to depreciate the property. For residential properties, this is usually over 27.5 years.


For example, let’s say you bought a house in Chile and started renting it out. 

You’ll calculate depreciation starting from the year it became a rental. If the house was worth US$300,000 when you started renting it out, you can divide that value over the allowed depreciation period.

What if I have a rental loss?

If the expenses on your rental property (including depreciation) are higher than the rental income, you’ll end up with a net loss. But don’t worry—you don’t just lose that loss. 

You can carry forward this loss into future years to offset rental or other types of income.

So, let’s say this year your rental expenses and depreciation exceeded the rental income by US$3,000. You can use that loss to offset any rental income next year, or any other passive income.

Can I use Chilean taxes to offset US taxes?

If you’ve paid Chilean taxes on your rental income, you can claim a Foreign Tax Credit (FTC) on your US return. This is to prevent you from being taxed twice—once by the Chilean government and once by the IRS—on the same income.

For example, let’s say you earned US$12,000 in rental income from your property in Chile, and you paid Chilean taxes on that income. 

You can use the amount of foreign taxes paid as a credit on your US tax return, reducing or even eliminating your US tax bill on that income.

Just remember that you need to keep records of how much tax you’ve paid to Chile, as you’ll need to fill out Form 1116 to claim the foreign tax credit on your US return.

Which forms should I file?

It depends. But generally, when reporting foreign rental income, you’ll use Schedule E (Supplemental Income and Loss) to report your rental income, expenses, and depreciation on your Form 1040

This schedule is specifically for rental properties and will help you calculate whether you made a net income or net loss on the property.

If you have a foreign rental property in Chile, you may also need to file Form 8858 for a foreign disregarded entity. This form is necessary for US persons who own foreign disregarded entities, like rental properties, and provides the IRS with information about the foreign business activity.

Will I have to pay both US and Chilean taxes?

In most cases, no. Thanks to the Foreign Tax Credit, you won’t be double-taxed. 

If you’ve already paid taxes in Chile on the income from your rental property, you can use that amount to reduce your US tax bill.

Typically, the tax rate in Chile might be higher than the US rate, so the Foreign Tax Credit will often cover any potential US tax liability.