Do I pay US tax on UK rental income?

Yes. As a US citizen or green card holder you report worldwide income, so UK rental income is taxable in the US — reported on Schedule E — as well as in the UK. The foreign tax credit usually offsets the US tax with the UK tax you paid on the same rent, so you rarely pay full tax twice, but you must still report it. The US and UK calculate the taxable rental profit differently, which is where the complexity lives.

Do I have to depreciate my UK rental property for US taxes?

Yes — US tax rules require you to depreciate residential rental property over a fixed recovery period, and it's not optional. This reduces your taxable rental profit each year, but it has a sting: when you sell, the depreciation you claimed (or were entitled to claim) is 'recaptured' and taxed, typically at up to 25%, even if the Section 121 main-home exclusion otherwise applies. The UK has no equivalent depreciation, so this is a US-only feature to plan for.

How does the foreign tax credit work on UK rental income?

The UK generally taxes the rental profit first, as the country where the property sits. You then report the same rent on your US return and claim a foreign tax credit (Form 1116) for the UK tax paid, which offsets the US tax on that income. Because UK rates are often comparable to or higher than US rates, the credit frequently reduces the US tax on the rent to little or nothing — but the credit isn't automatic and the profit figures differ between systems.

Do I report my UK rental property on the FBAR?

The property itself, held in your own name, isn't an FBAR or Form 8938 item. But the UK bank account you collect rent into, and any account a letting agent holds for you, are reportable on the FBAR (and possibly Form 8938) if your aggregate foreign accounts cross the thresholds. So while the property isn't reported, the cash flow around it often is.

What if I own my UK rental through a limited company?

That changes the US treatment significantly. A UK company owned by a US person is a foreign corporation — usually a controlled foreign corporation — so the rental income can fall under the GILTI/NCTI and Form 5471 rules rather than simply going on your Schedule E. Sometimes a check-the-box election is used to simplify this. Holding rental property through a company is rarely the simplifier people expect, and should be modelled before you do it.

US Tax on UK Rental Income: A Guide for American Landlords

If you let a UK property and you're American, you have two landlords-worth of tax admin: the UK's, and the IRS's. The good news is you rarely pay full tax twice — the foreign tax credit sees to that. The complication is that the two countries calculate your rental profit differently, and the US imposes one feature the UK doesn't: mandatory depreciation that quietly builds a tax bill for the day you sell. This guide explains how to report UK rent to the IRS and the traps to plan around.

The short answer

UK rental income is taxable in both the UK and the US for an American landlord. You report it on Schedule E of your US return as well as through UK Self Assessment, and the foreign tax credit generally offsets the US tax with the UK tax you paid on the same rent — so you rarely pay full tax twice. The key US-only feature is mandatory depreciation: US rules make you depreciate the building, reducing taxable rent each year but creating depreciation recapture (taxed up to 25%) when you sell. The property itself isn't FBAR-reportable, but the accounts around it usually are.

Key takeaways

UK rental income is US-taxable (Schedule E) as well as UK-taxable.
The foreign tax credit usually offsets the US tax with UK tax paid on the same rent.
US rules require depreciation — it's not optional — and it's recaptured on sale.
The property isn't FBAR-reportable, but rent and agent accounts often are.
Holding the rental through a UK company pulls in the CFC / Form 5471 / GILTI rules.

Executive summary

For an American landlord, UK rent flows through two tax systems that agree on the principle (rent is taxable) but differ on the arithmetic. The UK taxes the rental profit first as the situs country; the US then taxes the same income on Schedule E and credits the UK tax via Form 1116, usually neutralising the US charge. The defining US-only wrinkle is depreciation: US tax law requires you to depreciate residential rental property over a fixed period — lowering taxable rent now, but generating recapture tax (up to 25%) on sale, even where the Section 121 exclusion shelters the rest of the gain. Add in the fact that the property isn't FBAR-reportable but its rent accounts are, and that holding it through a company changes everything, and you have an area where the reporting is more nuanced than the headline "claim a credit" suggests.

Both countries tax the rent

Start with the simple part. UK rental profit is:

taxable in the UK, through Self Assessment (the property is in the UK, so the UK taxes first); and
taxable in the US, on Schedule E, because you're taxed on worldwide income.

The same rent, two returns. Without relief, that's double taxation — which is what the foreign tax credit exists to prevent.

The foreign tax credit does the heavy lifting

You claim a foreign tax credit (Form 1116) for the UK tax paid on the rent, offsetting it against the US tax on the same income. Because UK tax rates on rental profit are often comparable to or higher than US rates, the credit frequently reduces the US tax on the rent to little or nothing. Two cautions, though:

the credit is not automatic — it must be claimed and computed correctly;
the profit figures differ between systems (different allowable expenses, and the US depreciation below), so the income the US taxes isn't always the income the UK taxed.

The US-only feature: mandatory depreciation

This is the part UK landlords find genuinely strange. US tax law requires you to depreciate residential rental property over a fixed recovery period. It's not optional — and that matters in two directions:

While letting: depreciation is a deduction that reduces your taxable rental profit each year on the US side. Helpful now.
On sale: the depreciation you claimed — or were entitled to claim — is recaptured and taxed, typically at up to 25%, when you sell. Critically, this recapture applies even if the Section 121 main-home exclusion otherwise shelters your gain.

The UK has no equivalent depreciation on residential property, so this is purely a US feature — and one that turns "I'll just claim the exclusion when I sell" into "I'll claim the exclusion except for the depreciation portion." Plan for it from the start; don't discover it at sale. (More on the sale side in selling a UK home as a US citizen.)

What's reportable — and what isn't

A common point of confusion:

the property itself, held in your own name, is not an FBAR or Form 8938 item;
but the bank account you collect rent into, and any client account a letting agent holds on your behalf, are reportable on the FBAR (and possibly Form 8938) if your aggregate foreign accounts cross the thresholds.

So the bricks aren't reported, but the cash flow around them usually is. See FBAR filing and FATCA compliance.

If you hold the rental through a company

Holding UK rental property through a limited company changes the US analysis entirely. The company is a foreign corporation to the IRS — usually a controlled foreign corporation — so the rental income can fall under the GILTI/NCTI and Form 5471 rules rather than simply landing on your Schedule E. A check-the-box election is sometimes used to disregard the company and push the income back onto Schedule E. None of this is a casual choice — see holding UK property through a company before you restructure.

Common mistakes we see

Not reporting UK rent on the US return because UK tax was already paid — reporting is still required.
Skipping US depreciation (it's mandatory), then facing recapture anyway on sale.
Forgetting the rent and agent accounts on the FBAR.
Mismatching the UK and US profit figures and miscomputing the credit.
Holding through a company without modelling the CFC consequences.