US Tax Reporting for Americans Buying a Share in Europe

The first paperwork for a European second home should not feel like a tax seminar. It should answer three ordinary questions: what am I buying, who owns the property, and what information will I receive each year? For an American buyer, those answers also determine whether the purchase belongs on one or more US international information returns.

With co-ownership you own a real share of the home (an eighth, a quarter), not a right to use it. You can sell it, pass it on, and it rises and falls in value with the house. The legal set-up is arranged by our partner for each home and explained before you buy. For US taxpayers, that set-up is exactly the detail a US tax adviser will want to see, because the IRS looks at how an interest is held rather than at the marketing description.

The encouraging point is that this is planning work, not a reason to avoid the purchase. A clear explanation of the home's legal set-up and a short conversation with a US adviser before closing can identify the likely forms while the partner managing the home still has every document to hand. The expensive version is discovering the structure after the tax return is due.

Why the legal set-up matters to the IRS

US information reporting depends on what a buyer legally holds, not on the fraction printed on a listing. The same "1/8 share" headline can sit on different legal set-ups in different countries, and each can be treated differently for US purposes. That is why no article, and no listing, can tell an American buyer which forms apply to a particular home. A US adviser can, once they have seen the documents.

Consider a current Brixen, Tyrol home offered through COP. The listing describes a real one-eighth share with a minimum number of nights each year. That makes it a useful home to investigate, but it does not replace the transaction documents. An American buyer would still ask our partner to explain the legal set-up for that home and pass the documents to their US adviser before signing.

Other US forms your adviser may raise

Depending on the legal set-up and on how the purchase money is paid, a US adviser may want to rule several international information returns in or out. You do not need to know their numbers. You need to give the adviser enough information to decide, early, while questions can still be put to our partner and the local lawyer.

Some forms relate only to the purchase year; others can recur each year. Ask our partner what accounts, ownership statements and annual information will be available after completion, so that your accountant can obtain what they need without chasing it.

Form 8938: what the IRS says about foreign real estate

The IRS treats foreign real estate differently depending on how it is held. Its Form 8938 guidance says that foreign real estate held directly is not itself a specified foreign financial asset. Some other ways of holding property abroad can be reportable when a buyer's combined specified foreign financial assets exceed the applicable threshold. Which side of that line a particular share falls on is a question for your US adviser, with the home's documents in front of them.

For taxpayers living in the United States, the IRS currently states thresholds of more than $50,000 at year-end or $75,000 at any point for an unmarried person or someone filing separately. For a married couple filing jointly, the figures are more than $100,000 at year-end or $150,000 at any time. Higher thresholds apply to qualifying taxpayers living abroad: more than $200,000/$300,000 for a non-joint filer and $400,000/$600,000 for joint filers.

Those limits apply to the aggregate foreign financial assets, not just the holiday-home interest. A buyer with existing foreign accounts or investments can cross the line even if the new share appears modest in isolation. Conversely, the presence of a foreign home does not by itself prove that Form 8938 is due.

FBAR is a different test

Form 8938 and the FBAR are often mentioned together, but they do not report the same things.

The FBAR focuses on foreign financial accounts. A separate issue can arise if the buyer has a financial interest in, or signature or other authority over, a foreign bank or securities account and the aggregate account value exceeds $10,000 at any time in the year. A minority co-owner should not assume that the home's operating account is automatically their personal FBAR account; nor should someone with signing authority assume it is irrelevant. Ask who controls the bank account and what authority the buyer receives.

The local tax file still matters

US information reporting does not replace the rules where the property sits. Purchase taxes, registration costs, annual property charges, local reporting and tax on rental or resale depend on the country, the region and the home's legal set-up. Foreign tax credits may help prevent double taxation in some circumstances, but their availability, category and timing need individual advice.

The practical response is to appoint advisers who can exchange information. The local lawyer should provide the executed ownership and management documents, while the US adviser identifies the classification and filing consequences. If translations are needed, commission them before the first US return rather than during filing season.

This also fits the wider compliance journey. European lawyers and agents will usually request evidence of identity and source of funds before completion. COP's guide to proving where purchase funds came from explains why a tidy document file speeds up that process.

What to give your US adviser before closing

Before sending a deposit, put together a pack a US international tax adviser can review in one sitting:

• The legal set-up: our partner's explanation of how the home is held and exactly what you will own.
• The payment flow: who you pay, when, and for what.
• The documents: the co-ownership agreement, management agreement and booking rules.
• Annual information: what accounts, ownership statements and records of rental income or expenses you will receive each year, and from whom.
• Exit: how a sale works. You set the price; your co-owners get the first chance to buy at that price; if they pass, it goes on the open market.

Ask, too, whether any reporting support for international owners is included in the running costs. A share that is easy to enjoy should also be easy to document.

A calm way to make the decision

The purpose of this exercise is confidence. A good co-ownership home should stand up to simple questions and produce clear paperwork. It should tell the buyer what they own, how the calendar works, how costs are shared and how the interest can later be sold. The US overlay then becomes a defined annual task rather than an unpleasant surprise.

COP is an independent agent, not the managing partner, lawyer or tax adviser. We can identify current homes and request the property documents; buyers should take independent US and local advice before relying on any filing position. Our How It Works guide explains the broader purchase journey.

Frequently asked questions

Which US forms apply to a 1/8 share in Europe?

It depends on the home's legal set-up and on how the purchase is paid, so the honest answer is: ask a US international tax adviser, with the documents in hand, before you sign. Our partner explains the legal set-up for each home before you buy.

If I own foreign real estate directly, must it go on Form 8938?

The IRS says directly held foreign real estate is not itself a specified foreign financial asset. Other ways of holding property abroad can be reportable above the applicable threshold, which is why your adviser needs to see how your share is held.

Does the co-ownership share itself go on an FBAR?

The FBAR covers foreign financial accounts. A separate FBAR obligation can arise if you have a qualifying financial interest in, or authority over, foreign accounts and the aggregate threshold is exceeded.

Will reporting mean extra tax is due?

Not necessarily. Information returns report assets or transactions; reporting a purchase is not the same as owing tax, although rental income or a later sale may have tax consequences.

When should an American buyer speak to an adviser?

Before signing or transferring funds, when questions can still be put to our partner and the local lawyer, and when our partner can confirm what annual records owners receive.