Methodology
How we calculate your numbers
Tax parameters: tax year 2026, last verified October 19, 2026 (AbroadYield research desk – IRS and state sources cited). All country data has been verified.
1. Returns, step by step
- Gross rent — a year of rent at full occupancy (long-term), or nightly rate × 365 (short-term).
- Minus vacancy (or unbooked nights) — a share of gross rent that is never collected.
- Minus running costs — management (% of collected rent), maintenance, insurance and property tax (% of price), and condo/HOA fees.
- = Net operating income (NOI). NOI ÷ price is the net yield before tax.
- Minus local income tax on rent, using the country's regime: on gross rent (e.g. Spain for non-EU owners, Mexico) or on net income (e.g. Portugal), with progressive brackets where they apply (Greece).
- Minus additional US federal tax — see section 2.
- Minus state tax — your state's representative rate on net rental income. Most states give no credit for foreign tax. No state tax is assumed if you live abroad.
- = After-tax income. After-tax income ÷ price is the after-tax net yield. With a mortgage, subtracting a year of loan payments gives annual cash flow.
All figures are year-one estimates in US dollars, converted at the configured exchange rate (Market rates of 17–18 October 2026 (ECB, XE); refresh from the configured source in the admin panel, updated 2026-10-21). The simulator's exchange-rate slider changes the value of rent and local costs after purchase; the price and any loan stay in dollars.
2. US federal tax on foreign rent
- Schedule E net income = NOI − mortgage interest − depreciation. Depreciation = (price + closing costs) × 80% building share ÷ 30 years.
- US tax on that income = tax on (your taxable income + rental income) − tax on your taxable income alone, using the 2026 brackets for your filing status and the standard deduction ($16,100 single, $32,200 joint). Your income is estimated from the bracket you chose.
- Foreign Tax Credit (Form 1116) = the lower of foreign tax paid and the Form 1116 limitation: your total US tax × foreign-source taxable income ÷ worldwide taxable income, with the standard deduction shared out in proportion to income. Any excess is shown as a carryover (1 year back, 10 years forward), not as money back.
- Net Investment Income Tax of 3.8% on the lesser of net rental income and income above $200,000 (single) or $250,000 (joint). We do not offset NIIT with foreign tax credits.
The Foreign Earned Income Exclusion (Form 2555) covers earned income such as wages and self-employment income. Rental income is generally unearned income and cannot be excluded.
Simplifications: we ignore passive-activity rules beyond flagging paper losses, the AMT, itemised deductions, and other foreign-source income that could change your credit limitation.
3. The country score (0–100)
Each country gets nine factor scores from 0 to 100, combined as a weighted average. Your answers tilt the weights: a low risk tolerance raises the weight of stability; a retirement goal raises lifestyle; factors that don't apply to you (for example, financing if you pay cash) drop out.
| Factor | Base weight |
|---|---|
| After-tax yield | 25% |
| Tax efficiency | 15% |
| Closing costs | 10% |
| Ownership rules | 10% |
| Stability & risk | 10% |
| Lifestyle fit | 15% |
| Financing access | 5% |
| Short-term rental fit | 5% |
| Budget fit | 5% |
Badges: Strong fit from 68, Possible from 50, otherwise Not recommended for you. A country whose typical entry price is above your budget is never recommended.
4. Data sources and verification
We use official sources first (tax authorities, land registries, the IRS, FinCEN), then established market data providers for prices, rents and yields. Every report section shows its sources, the date it was last verified and who verified it. Data still labelled “Sample data – to be verified” has not been checked and should not be relied on.