Are Turkish residents in the United States required to pay taxes on their income earned in Turkey?

For Turks living in the United States, the economic ties between the two countries are not limited to money transfers. A house left by family in Turkey, a bank account opened years ago, regular rental income or a property planned for sale can also carry weight in tax procedures in the U.S.

The primary point that must be noted, especially for U.S. citizens and Green Card holders, is that the U.S. tax system does not rely solely on income earned within U.S. borders. For tax purposes, individuals residing in the U.S. are generally required to report worldwide income on American tax returns.

However, this does not necessarily mean that tax must be paid separately in both countries for every income earned in Turkey. The double taxation avoidance agreement between the U.S. and Turkey plays a crucial role, allowing foreign taxes paid under certain conditions to be deducted and applying different rules depending on the type of income to determine the tax due.

Who must report income earned in Turkey to the U.S.?

According to the rules of the Internal Revenue Service (IRS), U.S. citizens and individuals who are tax‑resident in the United States are generally required to include income earned in any country in the U.S. tax system.

This scope is not limited to Turks who have acquired U.S. citizenship. Green Card holders are generally subject to the same rules. Moreover, even if they do not hold a Green Card, individuals who are considered tax residents because of the time they spend in the U.S. can also face similar obligations.

The IRS's 'Substantial Presence Test'—a physical presence test—evaluates the number of days a person spends in the United States during the current year and the preceding two years using a specific calculation method. However, there are exceptions for certain visa holders.

Thus, simply holding a Turkish passport or not transferring income earned in Turkey to an American bank account does not eliminate tax liability in the United States.

Attention: Those earning rental income from a home in Turkey.

Let's imagine a Turkish citizen living in the United States who owns a house in Istanbul, Ankara, or another city and rents it out.

Rental payments are deposited into a Turkish bank account, and the money may never be sent to the United States. Nevertheless, if the person is a tax resident in the U.S., the rental income must be included on the U.S. tax return.

In the U.S., residential rental income is generally reported on Schedule E attached to Form 1040. However, the IRS does not automatically consider the entire rental income as taxable net profit.

Maintenance and repair costs, insurance, certain taxes, loan interest, and depreciation related to real estate can be considered in the calculation. Which expenses may be deducted depends on the property's use and the relevant tax rules.

Depreciation calculations for real estate located in Turkey may differ from those for U.S. residential properties. Therefore, preparing the U.S. return solely on the basis of the Turkish rental declaration may not yield accurate results.

Will taxpayers in Turkey have to make a second payment in the U.S.?

One of the most pressing questions for Turkish society is whether a taxable income paid in Turkey will be taxed a second time in the U.S.

The income‑tax treaty in force between Turkey and the U.S. regulates the taxing rights of the two countries and the provisions aimed at eliminating double taxation.

Under the treaty's provisions on real‑estate income, revenue derived from a property located in Turkey can be taxed in Turkey. However, this does not mean that a taxpayer in the U.S. can exclude that income from the American tax system.

Here, the foreign tax credit known as "Foreign Tax Credit" can be applied.

Income taxes paid in Turkey that meet the required conditions can be offset against a portion of the tax calculated on the same income in the US. For this transaction, most individual taxpayers use Form 1116.

However, it is not possible to automatically deduct the full amount of every tax paid in Turkey in the US. The type of tax, the nature of the income, the source country, and the offset limits are important.

Therefore, while some people may not incur additional tax in the US, others may still face extra obligations despite having paid tax in Turkey.

Should bank accounts in Turkey also be reported?

Another issue that Turks living in the US need to watch out for is bank accounts in Turkey.

The Financial Crimes Enforcement Network (FinCEN) under the U.S. Department of the Treasury requires that certain foreign financial accounts be reported through a filing known as FBAR.

The most important threshold for this obligation is $10,000.

If the aggregate value of a person deemed a U.S. person’s foreign financial accounts subject to reporting exceeds $10,000 at any time during the calendar year, an FBAR filing obligation arises.

What must be noted here is that the $10,000 threshold is not applied separately to each bank account.

For instance, a person with $6,000 in one Turkish bank and $5,000 in another has a total foreign account balance of $11,000 if both accounts hold those amounts simultaneously. If that person also meets the other conditions, they may be required to report both accounts.

Moreover, the absence of interest income from the accounts or the money not being sent to the U.S. does not, by itself, eliminate the FBAR obligation.

The FBAR filing is done electronically separately from the annual income tax return. The usual deadline is April 15, but an automatic extension is applied until October 15.

Separate reporting may be required for assets exceeding $50,000.

In addition to the FBAR, some U.S.-resident individuals may also need to report their Turkish financial assets on Form 8938.

Under FATCA, the thresholds vary depending on whether the person lives in the U.S. or abroad and on the filing status of their tax return.

For an unmarried taxpayer residing in the U.S., if the total value of foreign financial assets subject to reporting exceeds $50,000 at year‑end or $75,000 at any point during the year, a Form 8938 filing obligation arises.

For married couples filing jointly, the thresholds are $100,000 and $150,000, respectively.

However, there is an important detail: in Turkey, a house or plot registered directly in a person's name is not considered a financial asset reported under Form 8938 or FBAR simply because it is owned. In contrast, holding the property through a foreign company can trigger different reporting obligations.

Moreover, filing Form 8938 does not eliminate the obligation to file an FBAR when required.

Do people selling their homes in Turkey pay taxes in the U.S.?

There are also significant differences that U.S. taxpayers must consider when selling property in Turkey.

In Turkey, if a personally owned property acquired in exchange for consideration is sold after five years from the date of acquisition, capital gains are generally not subject to income tax. However, different rules may apply to properties obtained through inheritance or donation and to sales conducted within the scope of commercial activity.

In the U.S., there is no equivalent five‑year general tax exemption rule.

Therefore, a sale of real estate in Türkiye that does not trigger tax can be taxed as capital gains in ABD.

Moreover, the gain calculated in dollars may differ from the appreciation of the property in Turkish lira. In ABD tax calculations, the dollar equivalents of purchase and sale prices at appropriate dates, cost adjustments, and applicable exclusions are important.

If the sold property is the taxpayer's principal residence meeting certain conditions, the ABD residential real‑estate exclusion may also come into play. However, different rules apply to properties held for investment or rented out.

Therefore, before a sale in Türkiye, it is necessary to evaluate not only Turkish tax law but also ABD tax law.

The 2026 limit on rental income in Türkiye is clear.

In Türkiye, specific exemption amounts are applied to the taxation of rental income.

In 2026, the annual exemption amount for residential rental income was set at 58,000 TL. Individuals who meet the other conditions are not required to file an annual income‑tax return in Türkiye for rental income that falls below this threshold.

However, the conditions for claiming the exemption and the status of other income can alter the outcome. For those classified as narrow taxpayers in Türkiye, it is also important whether rental income comes from a property or from a workplace.

The key detail here is that the exemption limit in Türkiye does not automatically apply in ABD. Rental income that does not require a declaration in Türkiye can still be included in the U.S. tax assessment for a taxpayer residing in ABD.

There are also different rules for inherited homes and money received from family.

An inherited house from a family member living in Türkiye or a large sum of money sent from them is among the matters that Turkish residents in ABD must pay attention to.

In the ABD tax system, the value of inherited assets or genuine gifts is generally not treated as taxable income for the recipient. However, large inheritances and gifts received from foreign individuals may trigger an additional reporting obligation.

If a U.S. person receives an inheritance or gift exceeding $100,000 in a tax year from a nonresident or foreign entity, a Form 3520 filing may be required.

The subsequent leasing or sale of inherited real estate can also trigger additional tax consequences.

Thus, acquiring an inheritance, generating income from it, and selling inherited property are distinct transactions that must be evaluated separately.

What penalties await those who fail to file?

In the U.S., failing to report foreign financial accounts or income can lead not only to unpaid taxes but also to separate administrative penalties.

In particular, FBAR and Form 8938 obligations stand out because they are governed by rules distinct from those of the income‑tax return.

If Form 8938 is required but not filed, an initial penalty of up to $10,000 may be imposed. After the IRS filing, failure to meet the obligation can trigger additional penalties.

In FBAR violations, the penalty amount varies depending on whether the violation was intentional and the circumstances of the case. In some instances, fines can reach very high amounts.

However, it should not be inferred that everyone who failed to file in past years will automatically face the same penalty. The IRS also offers compliance procedures to correct past deficiencies for taxpayers who meet certain conditions.

What should Turkish residents in the United States do?

In this specialized field, the most important first step is for the individual to determine which country is their tax residence and what obligations they owe in both jurisdictions.

Bank accounts, rental income, interest earnings, real‑estate sales, and other investments in Turkey must be evaluated separately. In particular, those earning income in multiple countries must consider not only U.S. federal tax rules but also the tax regulations of the state where they reside.

For Turks living in New York, New Jersey and other states, state taxes may also need to be examined separately. Because ABD's international tax treaties do not eliminate state-level taxes in every case.

In an assessment with tax experts, having ready bank account statements, lease agreements, documents related to paid taxes, and real estate transaction records in Türkiye can help ensure accurate calculation of the transactions.

In conclusion, earning income in Türkiye does not necessarily mean that Turks living in ABD must pay taxes twice. However, having paid taxes in Türkiye or not bringing the earned money to ABD does not automatically eliminate ABD tax obligations.

A house, bank account, or investment in Türkiye could be a factor that must be considered in an ABD tax return. Therefore, knowing the rules between the two countries is important both for avoiding unnecessary tax payments and potential penalties.