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Becoming dual US/UK citizenship - property tax implications?

Becoming dual US/UK citizenship - property tax implications?

Old Aug 28th 2019, 3:54 am
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Default Becoming dual US/UK citizenship - property tax implications?

Evening all, Applying for US citizenship but what is the tax implications when selling a house in the U.K in the future when dual nationality? Thank you!
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Old Aug 28th 2019, 6:13 am
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Default Re: Becoming dual US/UK citizenship - property tax implications?

I don't know too much of the details for capitals gains tax. However, I figured I'd flag something else with you - I don't know how long you've had your green cards, but it sounds like it's a long time, and it may be that you'd be liable to the expatriation tax when you move back to the UK if you've been here long enough.

https://www.irs.gov/individuals/inte...eenCardHolders
2. I was a long-term resident of the United States prior to surrendering my green card. What is my U.S. tax filing obligation?
You are a long-term resident for U.S. federal income tax purposes if you were a lawful permanent resident of the United States (green card holder) in at least 8 of the last 15 tax years ending with the year your residency ends. In determining if you meet the 8-year requirement, do not count any year that you are treated as a resident of a foreign country under a tax treaty and do not waive treaty benefits.

If you are a long-term resident who has surrendered your green card, you may be subject to the expatriation tax. Please refer to the expatriation tax provisions in Publication 519, U.S. Tax Guide for Aliens, and in later questions. In general, the expatriation tax provisions apply to U.S. citizens who have renounced their citizenship and long-term residents who have ended their residency. The rules that apply are based on the dates of expatriation.

You may also be a dual status alien if you have been both a resident alien and a nonresident alien in the same tax year. Dual status does not refer to your citizenship, only to your resident status for tax purposes in the United States.
  • For The Part of the Year that You are a Resident Alien, you are taxed on income from all sources: inside and outside of the United States.
  • For The Part from the Time that You Abandon Your Green Card, you are taxed on income from U.S. source only.
https://www.irs.gov/individuals/inte...patriation-tax
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Old Aug 28th 2019, 4:01 pm
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Default Re: Becoming dual US/UK citizenship - property tax implications?

Originally Posted by rockymountains View Post
Evening all, Applying for US citizenship but what is the tax implications when selling a house in the U.K in the future when dual nationality? Thank you!
Simple question, but no simple answers.

The most simplistic and therefore incomplete answers are:

For UK tax, provided the house meets the requirements as a main residence, currently, there is no tax due on capital gains for a US/UK dual resident in the UK. Stamp Duty currently is paid by the purchaser.

For US tax, for a US/UK dual resident in the UK, provided the house meets the requirements as a main residence, the following applies:
1. Capital gains are calculated in the same way as if the main residence were in the US. Varying exchange rates between acquisition and sale will effect calculations.
2. Net Investment Income Tax is calculated exactly the same as if the main residence were in the US. There is no excess foreign tax paid allowed to offset NIIT.
3. Any currency gain on a UK mortgage, according to the rules of Section 988 (foreign mortgage), could be subject to additional tax. Varying exchange rates between acquisition and redemption will effect calculations.

There are many, many variations on the above subject to individual circumstances.
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Old Aug 28th 2019, 6:08 pm
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Default Re: Becoming dual US/UK citizenship - property tax implications?

Brilliant forum for this type of question on Facebook, I'm not Allowed to post a link due to being new, but this should help you find it ‘US expat tax questions’
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Old Sep 4th 2019, 2:10 pm
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Default Re: Becoming dual US/UK citizenship - property tax implications?

Hello rocky - I had a similar query for similar reasons a few months back, link below - sorry no idea how to share link
Feb 27th 2019, 7:05 pm
https://britishexpats.com/forum/usa-...tional-922518/
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Old Sep 4th 2019, 3:40 pm
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Default Re: Becoming dual US/UK citizenship - property tax implications?

Let's try this one more time.

The OP asked "what is the tax implications when selling a house in the U.K in the future when dual nationality? ". Unfortunately, the OP did not specify whether they were referring to a time in the future when: 1) they remained as resident (and tax resident) in the US as a dual citizen and sold a house in the UK, or 2) they were to be resident in the UK as a dual citizen and sold a house in the UK. Perhaps they could clarify, but in the case of situation 1 (remain resident in the US) dual citizenship would not alter the tax implications from their current tax obligations to both the US and the UK.

If the case is situation 2 (resident in the UK), and provided they met the requirements for main residence in the UK under HMRC rules:

In the UK for HMRC purposes, any capital gains resulting from the sale would be free of tax on the capital gains in the UK. If the house was purchased for £500,000 and sold for £1 million, the £500,000 gain would be tax free in the UK.

For IRS purposes, depending on a varying exchange rate, a house purchased for £500,000 and sold for £1 million may result in $0 US capital gains or it may result in £500,000 (or any other figure) taxable US capital gains. The $250,000 per person exclusion may mean they owe $0, or they may still have a capital gain even after the exclusion. They may have past excess foreign tax credits which would offset US capital gains if above the $250,000 exclusions, or they may not have sufficient past excess foreign tax credits to offset the US gain. They will not have normal tax credits (treaty or otherwise) from the sale to offset a US gain because there is no UK tax on the gain. They may have sufficient costs, improvements, etc. to reduce a US gain, or they may not. If they have a US gain, it may be above the relevant threshold of NIIT in which case they would also owe additional US tax as a result, or the gain may be below the NIIT threshold. Due to exchange variations, a £500,000 mortgage may result in a substantial US currency gain when repaid and substantial additional US tax may be due, or it may result in no US currency gain and no US additional tax.

Again, if tax resident in the US, dual citizenship will not alter current taxation obligations. If resident in the UK, there is no UK tax on the capital gain, but, depending on individual circumstances, dual citizenship may, or may not, result in US tax due which could be minimal or substantial (or anywhere in between). If resident in the UK, the variables for US tax for a dual citizen (or a US only citizen) are too numerous for anyone to reasonably comment on with any degree of accuracy without much further information.
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