Capital Gains Tax Confusion.EX-PATS HELP NEEDED !!!
 

:confused:

We are selling our house in the UK and moving to California ASAP.
We are greencard holders and have entered the US earlier this year for a holiday.
We have lived in our UK home for 20yrs.I understand that we are liable for CGT. in the US. however since this is our only residence is the gain excluded from tax?
We can't afford to emigrate if we have to pay 15% CGT!!!
Has anyone else had the same experience ?

We welcome any info.

Re: Capital Gains Tax Confusion.EX-PATS HELP NEEDED !!!
 

If the home has been your primary residence for at least 2 years in the last 5 you are not normally liable to pay capital gains tax when it is sold.

Re: Capital Gains Tax Confusion.EX-PATS HELP NEEDED !!!
 

See your other thread earlier...and by the way, if you have shares standing at profit utilise your UK allowance and sell them or sell them and buy them back 'taking' your profit. If you have shares/funds in ISAs or PEPs sell them and take any profit - they are not tax free in the US.


not to be construed as advice but rather pre-immigration consideration!

Re: Capital Gains Tax Confusion.EX-PATS HELP NEEDED !!!
 

As someone else stated, if you lived in the home for 2 out of last 5 years you will not have to pay gains due to a 'safe harbor' as they call it.

I didn't actually want to repeat what someone else said, but what I did want to say is that you need to be careful as to what you do with this house before you sell it. If you struggle to sell it, think twice before renting it out because the above law is changing on January 1st and it will exclude rental properties.

Consider this just a heads up. Better to have the house on the market longer and sell at a discount as opposed to putting yourself in a position where the safe harbor doesn't apply and you pay the gains anyway.

From what I understand, if Obama gets in gains tax will go up too. Normal for democrats apparently.

Re: Capital Gains Tax Confusion.EX-PATS HELP NEEDED !!!
 

Thanks. It's useful to hear similar comments from different people. Hopefully, we should be ok as far as CGT is concerned. But now find we have to consider shares, etc!!!

There is so much to think about! It has taken 9 years for us to get our greencards, we thought that was the hard part. Hearing all your comments, it appears the hard part has yet to come!

Re: Capital Gains Tax Confusion.EX-PATS HELP NEEDED !!!
 

does the US CGT have taper relief like it does in the uk? ie - do you get a personal allowance and can backdate it over the last 7 years of ownership etc? Or is it a cold tax on the difference in purchase and sale price no matter how long you have held it?

Re: Capital Gains Tax Confusion.EX-PATS HELP NEEDED !!!
 

The latter. And no index-linking to allow for inflation either. However, as others have indicated, there are special rules about CGT when selling your home.

Re: Capital Gains Tax Confusion.EX-PATS HELP NEEDED !!!
 

Although at present the long term CGT in the US is 15% and therefore, in theory, less penal, you should make use of your UK CGT allowances before you arrive and qualify as tax resident. Of course you won't need to use the allowance for PEPs/ISAs (cash ISAs are fine - its just the interest to be declared) but potentially they can suffer US tax of up to 80% on accrued gains (and interest on those gains) if you declare them to the IRS which in theory you should...shouldn't you ;);)

not to be construed as advice but pre-immigration consideration

Re: Capital Gains Tax Confusion.EX-PATS HELP NEEDED !!!
 

While there is no index linking for inflation do not forget that if you have made improvements to the property you may be able to increase your basis by some or all of the amount that you paid for the improvements.

Re: Capital Gains Tax Confusion.EX-PATS HELP NEEDED !!!
 

Hi:

Get PROFESSIONAL advice on this one. You are talking a bit of $$$ here and the advice might be worth it. You also don't give your ages.

This is way outside of my bailiwick, but I seem to recall that the rules on capital gains on residential property have changed a lot. Also, the "basis" rules can be tricky.

Re: Capital Gains Tax Confusion.EX-PATS HELP NEEDED !!!
 

Hi:

The IRS book on the thing is http://www.irs.gov/pub/irs-pdf/p523.pdf

I looked it up -- there is an exclusion from capital gains -- but it is limited to $250K for individual filer, but $500K for a married couple.

You might want to do the computations in that book.

Also, the prior "roll over" provisions for primary residence has been eliminated.

Re: Capital Gains Tax Confusion.EX-PATS HELP NEEDED !!!
 

Many thanks for the information. We will certainly have a look. The more we can find out the better.