Good morning everyone, I have a theoretical question about income from income generated in the US…
Good morning everyone,
I have a theoretical question about the income from the US taxpayer's income for reporting to the tax authorities in Israel.
As you know, there is a treaty between the United States and Israel for tax deduction. For example - if the tax on Israel is 20% and I actually paid only 10% in the US, then I will have to pay the 10% gap in favor of the Israeli tax authorities and not All the 20%.
The question for me is:
If, for example, US taxable income is set at $ 2000, can Israel determine that taxable income is higher, say $ 4500?
And for a more practical example:
If the US is allowed to recognize mortgage interest expense as an expense (and thus reduce taxable income), while it is not possible to recognize the mortgage interest expense on investment apartments in Israel. What will happen to the reporting of US mortgage income to the Israeli tax authorities? In the country the interest expenses I paid in the US and thus pay a higher tax?
As for the first question then yes, if you choose the 15% rental tax route, the taxable income in the country is likely to be greater than the taxable income in the US because in the country you can only reduce the depreciation of rent and in the US you can reduce all rental expenses.
About the second question depends on how you own the property and believe that a professional can give you the answer to the question.
It is recommended to consult Asher Toriel - Official Accountant of the Forum - https://www.forumnadlanusa.com/חברות-נדלן-מומלצות/ashertouriel/
What you wrote in the opening is indeed true. Israel calculates the profit differently than the way it is calculated in the US.
Profit in Israel can be higher.
With regard to whether Israel will recognize financing expenses
With direct possession, I believe they will recognize financing expenses.
Asher Touriel