Taxes Question - UK Property related
Jul 5th 2009, 3:14 pm
#1
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Thread Starter
Joined: Jun 2005
Location: Beaverton, OR 97006
Posts: 71
Taxes Question - UK Property related
Hi, I don't know if anyone can shed some light on this any advice greatly appreciated.
I am fortunate enough to have a property in the UK still which I rent out (and was honest enough to declare it on my US taxes) I don't own any property in the USA, but want to soon, so was considering selling the UK property to be relatively mortgage free in the USA. Would I be liable for capital gains tax on the property if I sold it, as I haven't lived in it for X number of years or would the fact that it's our sole property make it not liable for capital gains? If I do have to pay capital gains tax, would the capital gain be taxed on the price I purchased the property for in 2000 or the value when I became a US resident 2006 - if so it's probably about zero growth in that time space due to the property market tanking.....
Thanks!!
I am fortunate enough to have a property in the UK still which I rent out (and was honest enough to declare it on my US taxes) I don't own any property in the USA, but want to soon, so was considering selling the UK property to be relatively mortgage free in the USA. Would I be liable for capital gains tax on the property if I sold it, as I haven't lived in it for X number of years or would the fact that it's our sole property make it not liable for capital gains? If I do have to pay capital gains tax, would the capital gain be taxed on the price I purchased the property for in 2000 or the value when I became a US resident 2006 - if so it's probably about zero growth in that time space due to the property market tanking.....
Thanks!!
Jul 5th 2009, 6:15 pm
#2
Democracy advocate
Joined: Mar 2006
Posts: 12,460
Re: Taxes Question - UK Property related
http://news.bbc.co.uk/2/hi/business/7132838.stm
http://news.bbc.co.uk/2/hi/business/7560937.stm
http://news.bbc.co.uk/2/hi/programme...ch/4864868.stm
some of these might help your UK part of the situation. I think you'll find it depends if you have ever lived in the property, when you moved out, have you ever elected it as you PPR to the revenue and so on.
I suspect you'll have trouble calling it your PPR if you are not resident in the UK, in which case you have the time you were in it plus the last 3 years before the sale which will be non-CGT-able. Any bit in the middle you can probably index, there seems to be sone sort of one-off 40k relief plus your annual CGT of around 8k.
The CGT is on the GAIN - no gain, no CGT.
What is does for you in the US I have no idea - you might want to grit your teeth and pay for some advice.
http://news.bbc.co.uk/2/hi/business/7560937.stm
http://news.bbc.co.uk/2/hi/programme...ch/4864868.stm
some of these might help your UK part of the situation. I think you'll find it depends if you have ever lived in the property, when you moved out, have you ever elected it as you PPR to the revenue and so on.
I suspect you'll have trouble calling it your PPR if you are not resident in the UK, in which case you have the time you were in it plus the last 3 years before the sale which will be non-CGT-able. Any bit in the middle you can probably index, there seems to be sone sort of one-off 40k relief plus your annual CGT of around 8k.
The CGT is on the GAIN - no gain, no CGT.
What is does for you in the US I have no idea - you might want to grit your teeth and pay for some advice.
Jul 5th 2009, 10:31 pm
#3
BE Forum Addict
Joined: Feb 2008
Posts: 3,259
Re: Taxes Question - UK Property related
First instincts are that you are liable for CGT on both sides of the pond.
If you make money on it and it's not your main residence and hasn't been for a while - you are definitely liable for UK CGT.
As you became a US LPR before the sale of it them you are likely due to pay US CGT also, although this may depend on which state you reside in. The CGT rules for sale of property abroad are complex, suggest you get professional assistance with that one.
If you make money on it and it's not your main residence and hasn't been for a while - you are definitely liable for UK CGT.
As you became a US LPR before the sale of it them you are likely due to pay US CGT also, although this may depend on which state you reside in. The CGT rules for sale of property abroad are complex, suggest you get professional assistance with that one.
Jul 7th 2009, 5:38 pm
#4
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Joined: Jul 2003
Location: New York City
Posts: 611
Re: Taxes Question - UK Property related
Hi:
On the US side, the sale will be subject to tax on any capital gain. You can take the principal residence exclusion if you owned and lived in the property for 2 of the last 5 years. The exclusion is $250k (or $500k if married filing joint).
The gain would be calculated using the original price as the basis even though you weren't living in the US.
Also, if you claimed any depreciation while you were renting the property, this will be "recaptured" and taxed as ordinary income.
In addition if you have a mortgage on the property and have presumably been paying it off in pounds, you may have a foreign exchange gain or loss. A FX gain would be taxed as ordinary income. The calculation of this is extremely complex.
On the UK side, you will also be liable for CGT, but may be able to claim a certain amount of private residence relief if you can show that your employer requires you to work overseas, or if you sell within 3 years of leaving the UK.
You may also be able to claim taper relief or business property relief for the rental part depending on your situation.
Finally you may also be able to claim a credit for the US tax paid on the gain.
Hope this helps, good luck!
Pete
On the US side, the sale will be subject to tax on any capital gain. You can take the principal residence exclusion if you owned and lived in the property for 2 of the last 5 years. The exclusion is $250k (or $500k if married filing joint).
The gain would be calculated using the original price as the basis even though you weren't living in the US.
Also, if you claimed any depreciation while you were renting the property, this will be "recaptured" and taxed as ordinary income.
In addition if you have a mortgage on the property and have presumably been paying it off in pounds, you may have a foreign exchange gain or loss. A FX gain would be taxed as ordinary income. The calculation of this is extremely complex.
On the UK side, you will also be liable for CGT, but may be able to claim a certain amount of private residence relief if you can show that your employer requires you to work overseas, or if you sell within 3 years of leaving the UK.
You may also be able to claim taper relief or business property relief for the rental part depending on your situation.
Finally you may also be able to claim a credit for the US tax paid on the gain.
Hope this helps, good luck!
Pete
