There's a common misconception amongst the crash community that negative gearing is only available in Australia, New Zealand and Canada. Such a statement even appears in the emotively non-conforming wiki article on negative gearing written by some Aussie loser who lost his shirt by selling to rent many years ago here:
Negative gearing is a form of leveraged speculation in which a speculator borrows money to buy an asset.........
Deduction of negative gearing losses on property against income from other sources for the purpose of reducing income tax is illegal in the vast majority of countries, the exceptions being Canada, Australia, and New Zealand.
He's obviously unaware of a paper which appeared in the RBA Bulletin of December 2001 which included this table showing a list of 10 countries, all but one of which made negative gearing available.
Truth #1: Negative gearing is a strategy guaranteed to lose money A negatively geared property is designed to enable you to access an immediate tax deduction arising from the shortfall of rental income failing to cover your property expenses. In other words, negative gearing is a strategy guaranteed to make a loss. In order for you to afford this loss, you'll have to fund it out of your existing cash flow by working longer hours, or by taking a lifestyle cut. For most people this means going without some of the luxuries they previously enjoyed. No one wants to lose money, but it is testimony to the power of effective marketing that smart investors are fleeced out of thousands of dollars by being conned into a concept that only exists to lose money in the short term. The only way an investor can make money from negative gearing is if any potential future capital appreciation is higher than the certain cashflow loss incurred today. Negative gearing is a valuable profit-making tool in a rising market. But it is not a strategy for all investing seasons. Truth #2: The dangers of depreciation Buying a property based on depreciation benefits is dangerous and deceptive. Depreciation is an accounting term used to describe the wear and tear of an asset that occurs over time. In practical terms, depreciation on a property refers to the carpet wearing down, the walls becoming chipped or stained and the furniture dating. In most new properties you are allowed to claim a tax deduction for the depreciation of the fixtures and fittings and in certain circumstances you may also claim a building write-off of either 2.5 per cent or 4 per cent of the property (not land) value too. Slick marketing companies sell the notion of the taxman paying off your property using depreciation and building write-off deductions, but this sales pitch is quite deceptive because you don't avoid paying tax with depreciation, you just defer it. Commonsense suggests that depreciating an appreciating asset like property will give you a tax deduction today, but you'll have to repay it in the form of capital gains tax at a later date when you sell. 'Bracket-creep' issues can catch out many taxpayers too. If you earn $50,000 when you buy the property you will only be able to claim a deduction for depreciation at 43.5 cents in the dollar, but if your income rises to $60,000 when you sell then you'll need to repay the depreciation at 48.5 cents in the dollar. If you don't ever plan to sell the property then at a minimum you should recognise that your depreciation tax deduction represents the wear and tear on your asset that will need to be eventually refurbished in order to continue attracting quality tenants. Finally, beware any financial model that allows for depreciation benefits but does not include a maintenance budget. You cannot have depreciation without an expectation of repair costs - even new properties still need tap washers replaced. Truth #3: The deception of attracting premium tenants A common strategy used to sell negatively geared property is to focus on purchasing a blue-chip property that will attract a premium tenant, since a premium tenant is more likely to be a quality long-term and high paying occupant. Yet my experience reveals premium tenants are often the most volatile segment of the rental market. When times are prosperous, then premium tenants look for glamorous living in the newest kind of accommodation available with all the modern conveniences. But when the economy contracts, premium tenants with high paying salaries are at a high risk of being downsized. If this happens, then they will seek cheaper accommodation leaving investors owning expensive property competing for new tenants in a shrinking market. In times of serious recession it's not unusual to expect vacancies of three months or more on premium property, which can make owning negatively geared property an absolute investing cashflow disaster. A better strategy would be to attract a quality tenant who is willing to pay between 10 and 20 per cent above the market rate for a well-maintained property and decent landlord service. There will always be demand for a house that the average family can afford to live in. It would be wise for you to focus your attention on purchasing a property that is less prone to market fluctuations, and then seeking to charge above market rates for a quality property to attract long-term tenants that want to treat your property like a home. Truth #4: Unfair comparisons Figures used to substantiate expectations of appreciating property values are in many instances downright deceptive. One common example is the rise in the value of median property prices being applied to premium real estate market. In reality property prices can rise and fall in the same market at the same time. To eliminate this variance, statisticians adopt a mathematical snapshot of the market based on the value of median property sold during the period. Movements in the median property price are certainly not representative of movements in the highly priced end of the market. Attempts to correlate movements in the median property values to highly priced real estate is statistically incorrect at best and potential fraud at worst. Making an assumption that real estate values double every seven to ten years, across all types of property (houses, units, etc.), in all States, is misrepresentative. It's very easy to build a financial model and then hide distant reality in broad assumptions or leave out important information all together. For example, making no allowance for vacancies after the rental guarantee period has finished or showing after tax nett profit with no allowance for capital gains tax payable when that asset is sold. One quick way to test the conviction of a sales agent promising capital appreciation is to get him to personally guarantee it in writing. Given the degree of their certainty about rises in property value and considering the massive investment you'll need to outlay to own a blue chip property, a written guarantee simply confirming the underlying assumption isn't too much to ask. Be very wary of the assumptions used in any financial model. Truth #5: Who's really paying for the secret commissions? If you liked the idea of purchasing property similar to the one that John purchased then you're probably asking 'Where can I find such a property?' Enter the free seminar circuit, which is often little more than an elaborate attempt to sell you an over-priced property that meets the finely-tweaked financial models devised by clever marketing agents who are paid a commission to sell real estate on behalf of developers. It's not unusual for commissions to be five per cent of the sales price, which on the property used in the earlier example amounts to $11,500. This fee is not paid from the developer's margin. It's a cost added on top and paid for directly by you the purchaser. It can become unnecessarily expensive buying prime property off the plan when there are kickbacks to financiers, fit-out providers and sales agents all funded by you as the purchaser. Negative gearing is often sold as a strategy that will make you rich in the future, but when you buy a boutique property you'll be making developers and sales agents rich today. Be very wary about letting other people profit at your expense. Remember to always ask 'Who gets paid when I buy?' Truth #6: The trap of trying to save tax! One of the many sales reasons given for investing in a negatively gearing property is that qualified accountants recommend it. Indeed, if you approached most accountants and asked for strategies that legally minimised tax then negative gearing would be one of the first options discussed. But investing in negatively geared property to save tax is a double-edged sword. For every dollar you lose, you'll only ever recoup a maximum of 48.5 per cent back as a tax saving. While you're waiting for illusive capital appreciation you'll be working longer hours and trying to cut back spending in order to fund the continual cash outflow when your property expenses are always higher than your rental income. If you are paying your accountant for advice then spend your money searching for strategies that will earn cash profits, not ways that are guaranteed to make a loss. You might pay more in tax but you'll also be earning much more cash profits too. Truth #7: How many of these properties can you afford to own? As you own more negatively geared property, your after-tax available cash reduces. This is because you only ever recover a maximum of 48.5% in a tax deduction, the remaining 51.5 cents in the dollar comes from your back pocket. It makes sense that as you own more loss making property your real buying power shrinks in ever decreasing circles.
Borrowing money to buy an investment asset without receiving enough income from the investment to cover the interest expenses and other costs inolved in maintaining it. Depending on the investor's home country, the shortfall between income earned and interest due can be deducted from current income taxes. Countries that allow this tax deduction include Canada, Australia and New Zealand.
Negative gearing is a form of leveraged speculation in which a speculator borrows money to buy an asset, but the income generated by that asset does not cover the interest on the loan. In a few countries the strategy is motivated by taxation systems which allow deduction of ongoing speculative losses against highly taxed income, but tax capital gains at a much lower rate. When income generated does cover the interest it is simply geared investment which creates a source of passive income.
A negative gearing strategy can only make a profit if the asset rises so much in price that the capital gain is more than the sum of the ongoing losses over the life of the speculation. The speculator must also be able to fund the planned shortfall until the asset is sold. The different tax treatment of planned ongoing losses and possible future capital gains affects the investor's final return. This leads to a bizarre situation in the few remaining countries which tax capital gains at a lower rate than income. In those countries it is possible for a speculator to make a loss overall before taxation, but a small gain after taxpayer subsidies.
Deduction of negative gearing losses on property against income from other sources for the purpose of reducing income tax is illegal in the vast majority of countries, the exceptions being Canada, Australia, and New Zealand.
This is from a related RBA Research Discussion Paper written by Luci Ellis of the RBA:
On the other hand, ownership of private rental properties also attracts favourable tax treatment in many OECD countries (Miron 2001). Negative gearing tax provisions in many countries allow landlords to deduct interest payments against income from other sources if they exceed rental income net of expenses, while tax credits and loan subsidies apply in France (Cardew, Parnell and Randolph 2000). These tax provisions generally ensure that owners of rented dwellings receive the same tax treatment as owners of other commercial properties (Weicher 2000). Since they are common across developed countries,Australia’s negative gearing provisions do not represent a relatively greater incentive to invest in rental properties.
A comparison of international quarantining measures
Negative gearing is not permitted in the U.K. and the Netherlands. Interest deductions are restricted in the U.S., Sweden, Germany, France and Canada. There is not a high degree of uniformity or overlap of approach to the quarantining of interest deductions overseas. The overseas measures are compared below. In general, while a fairly broad approach is applied in the U.S. (with passive investment rules) and a somewhat narrower approach applies in the U.K. (where investment income is quarantined under a specific schedule), in most countries rental income is given quite specific tax treatment that differs from other jurisdictions.
Little comment needs to be made in relation to Japan and New Zealand, which like Australia allow negative gearing on investment housing. However, it may be noted that previously in New Zealand the Commissioner for Inland Revenue denied negative gearing on rental properties by administratively quarantining the interest deduction to the amount of net rental income. This administrative quarantine no longer applies.
The U.S. has an extensive system of limitations on deductibility, including ‘passive activity loss’ rules. While interest is generally deductible there are notable limitations.
Rental income is treated as passive income. Unless the individual actively participates in the rental activity, losses from rental property may be limited. Individuals who actively participate in the rental activity may be able to deduct up to $US25,000 of loss against other income. No additional loss is available for individuals whose modified adjusted gross income exceeds $US150,000.
Interest is only deductible on rental properties to the extent it does not exceed the taxpayer’s net investment income, however the excess may be carried forward up to 20 years and offset against future net investment income. Alternatively it can be offset against capital gains realised on the sale of U.S. real estate.
The U.K. adopts a schedular system to quarantine deductions for investments. Losses from one activity source can only be offset against future income from the same source. Rental property losses are quarantined to income from real property under Schedule A.
Whereas each Schedule and Case has its own detailed expense rules, generally expenditure may be deducted if it is incurred wholly and exclusively in gaining income that is prima facie liable to income tax. Losses and outgoings of a capital, private or domestic nature are expressly excluded from deductibility. Each Schedule and Case has its own loss rules. Generally there is no facility to set off a loss under one Schedule against income from another, with a notable exception for losses incurred in a trade, profession or vocation (assessable under Schedule D, Cases I and II). Otherwise, except for losses from employment (for which there is no provision), income losses can generally be carried forward indefinitely but can only be offset against future income from the same source.
In Canada interest is not generally deductible as it is considered a capital expense for income tax purposes. Interest can be deducted in limited instances where income is gained from a business or property. 
The prospect of a capital gain alone will not be sufficient to make interest expenditure deductible, however if there is a reasonable possibility that the investment will eventually generate ordinary income in excess of the interest expense, a deduction for the interest will normally be allowed. Specific restrictions apply to certain real estate investments. For example, interest incurred during construction of a building is capitalised and added to the cost of the building, and taken into account when the building begins to generate an income stream or when it is sold, not when the expense is incurred.
There are also rules designed to prevent passive investors from sheltering income from losses. 
Under case law in Canada, a rental property is not normally considered a business in the hands of an individual unless extended services, substantially beyond the mere provision of space, are provided. Where the rent constitutes business profit, net income is computed by including the right to deduct interest and depreciation. However, rental income will usually be defined as ‘specified investment business income’ rather than active business income.
In the Netherlands, there are no general restrictions on using losses from one income category to offset against income from any other category. However, for interest to be deductible in computing net rental income, the real estate must be part of a business operation for a private individual. Normally this requirement will not be satisfied for rental properties.
In Sweden a credit is allowed for losses in respect of income from capital at a rate of 30% for losses up to $15,000 which can be offset against income from other categories. For losses in excess of $15,000 the credit rate is 21% and is restricted to current year losses where the gain on the investment is deferred.
In Germany rental income is one of seven income categories. Losses can be carried forward against future income or offset against previous income, but a limit applies to the amount of losses that can be carried back. Losses in particular income categories can generally be applied against income in other categories.
In France there are separate categories of income. Restrictions apply to certain categories of losses. For real estate losses, the first €10,700 can be set off against other income, but to the extent it arises from interest outgoings, it must be amortised over a 10 year period against future rental income. The excess losses over €10,700 not due to interest paid may only be carried forward against future rental income for a maximum period of 5 years.
Rental income in France is not subject to withholding tax and is assessable with other income as declared in the annual tax return, although it must be returned in a special schedule attached to the tax return. A restrictive list of expenses can be deducted against rental income, which includes interest expenses related to acquisition costs and finance expenses.
Also, interesting to note the relationship between house prices and negative gearing provision, and more specifically, a lack thereof.
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