newyearsrunner

Dear helpful people,

I am sure this has been asked before and I’ve found ‘answers’ on other sites but really want some confirmation. My wife (USC) and I (Brit) live in UK and we are looking to buy our first home. It would be our permanent residence and we would not rent it out.

From what I understand, when we eventually sell the property it would be exempt from any US tax liabilities due to being our permanent residence? Is this right? I stress, I know that everything changes if you rent it out or use the property for other purposes, but for a strictly residence/family home situation.

Thanks in advance and hoping for good news

Wintersong

You have to report the gain/loss on your wife's tax return but if you've lived in the property for at least 2 (of the last 5) years, there's an exemption for up to $500k of gains. If you have more than $500k in capital gain on the sale, she'll be liable for a reduced rate of capital gains tax on the 'foreign sourced income'.

Wintersong

NB: Be aware of form 8938, if you aren't already: https://www.irs.gov/uac/form-8938-st...nancial-assets

newyearsrunner

Thanks Wintersong, that is very helpful.

Geckz

Not sure about your tax affairs - but be aware of section 988 also

https://www.taxadvisorypartnership.c...nge-rate-gain/

Pulaski

But unless NewYearsRunner has/obtains and SSN or ITIN, then his wife will have to file taxes "married filing separately", and if he does obtain the requisite number so his wife can file jointly then his own income is going to end up on a US tax return. That's not to say any tax will be payable (though it might), but it will considerably complicate his wife's annual tax return.

My recommendation would be for NewYearsRunner to buy the home in his name alone and leave his wife and her US taxes entirely out of the picture.