Like US citizen or resident who owns US rental property, you need to report any foreign rental income generated by renting out your foreign-located rental property.
You need to report your foreign property rental income and expenses just like you would do with your US rental income-with a few exceptions.
You need to calculate your foreign rental income, which is rental less expenses. The expenses related to rental could be foreign mortgage interest, local foreign property taxes, repair expenses, management fee expenses, and travel expenses incurred to inspect your foreign property (if personal days are involved, you will only be able to deduct expenses related directly to the management of your foreign property).
You need to report your foreign rental income and expenses in USD. The IRS has no official exchange rate. In general, use the exchange rate prevailing (i.e., the spot rate) when you receive the property, made any capital improvements and sold the property.
The IRS’ website has more information about Foreign Currency and Currency Exchange Rates and Yearly Average Currency Exchange Rates.
If you are required to pay foreign income taxes (or capital gains taxes on a foreign rental property sale), you may be able to offset any US income taxes paid on this foreign sourced income with a Foreign Tax Credit to prevent this income being subject to double taxation.
One of the main differences is that the depreciable building portion of your cost basis in this foreign rental property must be depreciated over a 40-year recovery period. (Land cost is not depreciable.).