Giantaxe

We're talking about the US tax consequences, not the UK.

Giantaxe

That was the case until '97ish. You had to roll over the gain into a property of greater than or equal value to avoid capital gains on the prior primary residence sale. The law was changed in '97 so that a primary residence sale gets $250k capital gains tax free per owner ($500k for married filing jointly), so as long as you can claim the primary residence in the UK is still the primary residence (and the gains are below the threshhold) you don't even have to declare the sale to the IRS.

I suspect that's the case too. However, the people who I've known who've sold have never been liable to tax anyway. This was pre-97 and they bought properties here of higher value. Today, it's only going to apply to those folks who don't sell within three years of vacating it and/or have cap. gains over the threshholds.

scrubbedexpat099

Claiming as primary residence would be slightly incompatable with Permanent Resident status, perhaps something to wait until you have citizenship.

I also have a feeling that the norm is that the IRS never hears about it.

Big D

No we are talking about tax on the sale of a UK property (well we were originally) and which country you pay it in appears dependent on many things!

scrubbedexpat099

The OP raised both, or did not specify.

UK is relatively easy, US is more of a question mark.

Giantaxe

When someone follows up a post specifically about the IRS's 2 out of 5 years rule with a link to a UK government CGT document, it's not exactly useful is it?! That was what I was referring to, not the thread as a whole.

Fitz750

Agreed

Hence why you have the double taxation agreements to avoid paying in both countries.

The rules may be different but it seems CGT is applicable in both the UK and US.

I'm still waiting for an answer to the second part of the OP question.

How long would you need to live back in your own UK house to avoid paying CGT in the UK, any ideas.

Big D

Fair enough - whole thread has got so complex now anyway!

CaliforniaBride

Read my links.

CaliforniaBride

I remember someone responding on here a while back but I can't remember who it was. But because of the tax agreement between the Uk and US he wasn't liable. That was on the advice of his attorney.

scrubbedexpat099

An attorney?

RaleighGuy

I sold my UK house after being in the US for just over four years. (I originally planned to return to the UK after a three-year position, but I ended up marrying a US citizen and so stayed here...)

The sale was subject to US capital gains tax, and since I had been in the US for four years, I couldn't use the "3 out of the last 5 years" exemption. (I ended up being able to claim a partial exemption because the house sale was prompted by a change of employment here in the US.)

The US apparently didn't care that much of the capital gain occurred before I was subject to US tax laws (unlike Canada, for instance, which I believe reassesses the value of the property on the date you moved to their jurisdiction).

The IRS also requires you to figure the capital gain in dollars, so currency fluctuations can hurt you even though both the purchase and sale were transacted in sterling. (This means the IRS can charge you a capital gain even if the pound value remained unchanged...) This stung me, since I bought my house around the time of the pound's ERM debacle and sold as the pound approached the 2 dollar mark last year. And just to rub it in, the IRS didn't let me count the dollar capital loss I made on my mortgage (its dollar value increased over the time I held it) as a capital loss to offset the capital gain.

Two things mitigated my tax blunder: the pound was really strong when I finally got the house sold, and there had been a reduction in the federal long-term capital gains tax rate (about the only Dubya policy that we have been thankful for...)


To cut a long story short, a one year delay in selling my house cost me a US federal tax bill approaching 25 000 dollars. And then I got walloped for another 10 000 dollars or so in state taxes on top of that (I live in a state that taxes capital gains the same as regular income)...

blaze

We sold a property in Britain whilst we had been living back in the states for about 6 months. It was all done via phone and mail, however, the home was put up for sale whilst we were still living in it. We did not pay a single cent in capital gains (the money first went into our British bank account and then was later transferred into our American bank account.) I was worried about it at the time but it was never brought up by anyone at anytime before, during, or after the transaction. At what point in time if they were going to take taxes from you would they have done it?

neil

You were fine in that circumstance I believe - you were within the residence requirement in that you had lived in it for 2 out of the last 5 years (same requirement in both countries I believe). If you're staying in the US for more than 5 years then you're always exempt from UK capital gains, but could get stung for US.

As a point to note - they would not have "taken" the tax but you would have been expected to declare it.