US tax on Dubai property: rental income, 30-year depreciation, FBAR and capital gains

American interest in Dubai property has risen fast: DXBinteract measured the United States at 13% of international online interest between June and August 2026, second only to India and the highest US reading it has recorded. For an American, the UAE side of a purchase is simple, and the dirham's peg to the dollar removes most currency risk. The US side is the one to plan: the IRS taxes citizens and resident aliens on worldwide income, there is no US income tax treaty with the UAE, and foreign rentals follow their own depreciation rules. This guide sets out the federal position as published by the IRS and checked on 12 November 2026. It is general information, not tax advice; a CPA or enrolled agent should confirm how it applies to you, and state tax is not covered.

US tax on a Dubai property at a glance

Worldwide income, no treaty, no credit

The IRS is explicit: US citizens and resident aliens are subject to tax on worldwide income from all sources, and the filing rules are generally the same whether you live in the US or abroad. A taxpayer living outside the US on the regular due date receives an automatic two-month extension, to 15 June for a calendar-year return.

The usual protection against double tax is a credit for foreign tax paid. It rarely matters here, for two reasons. PwC's summary, reviewed on 9 September 2026, confirms that the UAE has no personal income tax, so there is no UAE tax to credit. And the IRS's list of US income tax treaties, updated on 3 January 2026, does not include the UAE. Dubai rent is therefore taxed in the US in full, in the same way as rent from a US property.

Rental income and the 30-year rule

Rent is reported with its expenses: service charges, management fees, insurance, repairs and depreciation, converted into dollars. IRS Publication 527 covers residential rental property generally.

The difference from a US rental is depreciation. IRS Publication 946 requires the alternative depreciation system (ADS) for any tangible property used predominantly outside the United States. For residential rental property the ADS recovery period is 30 years, or 40 years for property placed in service before 1 January 2018, against 27.5 years under the general system used for a US rental. Only the building can be depreciated, so the price has to be allocated between building and land.

Worked example

All figures here are illustrations, not market data. You buy a Dubai apartment for AED 1,500,000, which is $408,441 at the peg, and let it for AED 90,000 a year ($24,506). Running costs, service charges and management, are AED 22,000 ($5,990), and $360,000 of the cost is allocated to the building.

Under the 27.5-year US schedule the depreciation would be $13,091. The 30-year rule costs this owner about $1,100 of deduction a year. In a part year the first and last years are prorated under IRS conventions. Model the gross and net yield before tax in the rental yield calculator.

Selling: capital gains

IRS Topic 409 sets out the rules. A property held for more than one year produces a long-term gain, taxed at 0%, 15% or 20% depending on your taxable income; most individuals pay no more than 15%. Higher earners may also owe the net investment income tax of 3.8% (Topic 559). Depreciation claimed while the property was let reduces your basis, which increases the gain.

The UAE does not tax the gain. In Dubai the costs on a sale are transactional: agent's commission and, depending on the contract, a share of transfer costs. See Dubai property buying costs for the fee schedule.

FBAR and Form 8938: what is reportable

The IRS's comparison of the two regimes, updated 19 September 2026, settles the common question.

Form 8938 thresholds depend on where you live and your filing status. For an unmarried taxpayer living in the US, more than $50,000 on the last day of the year or $75,000 at any time; for one living abroad, more than $200,000 or $300,000. Married couples filing jointly have double those figures. Holding a Dubai property through a company changes the reporting and may bring other rules into play; take advice before using one.

The short definition, with the threshold, is in our glossary entry for the FBAR. For a Dubai budget worked out in dollars, see Dubai property costs in US dollars.

The dollar peg

The UAE dirham is pegged to the US dollar at AED 3.6725. The open-market rate published on 12 November 2026 was 0.272294 dollars per dirham, which is that peg. For an American buyer three things follow:

• The price does not drift. An AED 1.5 million apartment is about $408,400 at booking and at handover.
• Rent keeps its dollar value. AED 90,000 a year is about $24,500 whatever the foreign exchange market does.
• Tax computations are simpler. Dollar cost and dollar proceeds track the dirham figures, so exchange movements add little to a gain or loss.

The residual risk is a change to the peg itself. Your bank's conversion margin on the wire is the cost that varies.

Buying from the US

You do not need UAE residency or a visa to buy. Non-UAE nationals can own freehold in the areas of Dubai designated under Regulation No. 3 of 2006, in Abu Dhabi's investment zones and in Ras Al Khaimah's freehold areas. An off-plan purchase can be reserved and paid for by wire from the US; a resale transfer or handover needs you in Dubai or a power of attorney attested by the UAE embassy and the UAE Ministry of Foreign Affairs. The process is in how to buy property in Dubai, and our United States buyer guide covers flights, the time difference and costs in dollars.

Records to keep

• The sale and purchase agreement, title deed and Land Department fee receipts, for basis.
• The allocation of cost between building and land, and how you arrived at it.
• Tenancy contracts, rent received and every expense invoice.
• Wire confirmations and UAE bank statements, for the FBAR and the return.
• On sale: the transfer documents and the agent's invoice.