MrsT3030

I work for a large international corporation and have always said I'd love an opportunity to move to their office in Florida. Well now it looks like it may actually happen and I find myself a bit panicked.

We have a home in the UK that we don't want to sell, but would hope to rent to cover our mortgage and bills. What do I need to know about that (particularly regarding tax)?

Currently both my husband and I both work. I am the far higher earner so we could manage just on my salary, but ideally I'd like our visas to allow him to also work. Does such a thing exist? I've heard usually the spouse cannot work when a couple emigrated to the US for the other spouse's job. Is that true?

In theory it feels simple - rent out our house, sell our cars, rent new house in Florids, move to US, hubby looks after our 3 year old and maybe works part time.

I have the feeling it is probably not that simple though?

My company will support us greatly but at this stage I don't know what that entails, so am trying to get a realistic and 'worst case scenario' overview before we consider whether it's an option for us.

Pulaski

Usually when an employer relocates you, you get an L-1 visa and your spouse gets an L-2, which on application, once you have arrived, for an EAD (employment authorization document) allows work.

Holding on to your home, unless you are reasonably likely to return to it, is setting yourself up for a large capital gains tax bill, either from the UK, or the US, or both! The tax paid can be offset tax paid in one country credited against the other, but the US tax on capital gains is not as generous as the UK, in that even if you sell soon after you move out, your tax free gains are capped at no more than $500,000. You can also end up with a capital gain assessed on the mortgage when you pay it off on sale of the house - because it cost fewer dollars to pay it off than you received when you first took out the mortgage. It might be a tough decision, but selling within 18 months to avoid UK capital gains, which should also eliminate most if not all (upto $500,000) of the US capital gains, is usually the smart choice.

mrken30

Unless you plan on keeping your UK house until you die and then CGT is reset in the US as far as I know. Not sure about the UK.

Pulaski

Inherited property in the UK is given a "free uplift" to its market value on death of the owner i.e. the inheritor receives it at market value on the date of death of the previous owner. That market value is also the value on which inheritance tax, if any, is assessed.

Bob

As mentioned, company transfer, spouse gets EAD to allow work. It's usually good for a couple of years but sometimes issued for a year and is a cost, so worth getting company to stump for it as part of the package and takes 90 days to get.

Capital gains, worth noting the UK side of things have changed recently, so if you've been searching past threads, older than a year old, those threads might not be as relevant.

Plenty of threads on FL, so worth a search to get an idea on things to consider, especially when renting. Will need a couple of cars and factor in higher cost of insurance and lack of US credit/driving history.

Plan for possibility that one of you might not like it. Settling in can be hard if one isn't working as there is already a built in network of people you spend time with. Having a kid helps as you can meet up through play groups and the library. Childcare, could be very expensive.

MrsT3030

Thank you so much, this is very interesting. I browsed the forums and no one has much good to say about moving to Florida, which is a real shame. The schooling situation makes me nervous although I'm not sure what age kids actually start school out there?

Does anyone know if capital gains tax (or similar) is paid on rental income from a UK property?

civilservant

Not CGT, but certainly you will be taxed on it!

MrsT3030

Oh goodness. In the UK or the US? Do you happen to know what rate of tax is charged on that?

scrubbedexpat099

Your highest marginal rate, different rules different deductions.

UK CGT rate is likely to be higher than US, no idea what Federal rates are compared to Florida State.

UK situation changed last year.

Pulaski

Right, but the rules and calculations are different, so if you hold your property until it is potentially taxable in both countries, (18 months after you move out for HMR&C, 36 months after you move out for IRS), then it is quite possible to be assessed tax in both countries, but because of the tax treaty they can be offset, one against the other, and your out of pocket cost will be whichever is greater.

The UK charges your marginal income tax rate, the US charges 20%, but the UK has indexation allowance, and I believe the US does not.
You will pay income tax in the UK on it but it will also be part of your US tax computation. Tax paid in the UK will almost certainly be greater, and if that is the case, because of the offset rules, you will owe no tax in the US on your rental income. As for CGT, the rules for calculating your rental income are different, with the US being much more generous, which is why the US figure is likely to be a lot lower.
Schools in Florida have a generally poor reputation, even compared to the rest of the US. I have never lived there, and have no desire to do so, as I have no understanding of the obessive attraction that Florida seems to have for some people. Why do you think it is "a shame"? ..... You have never lived there, and so don't know what living there is really like.

I think children in Florida start kindergarten (the first year at school) in the first August after their fifth birthday.

mrken30

However private schools in the US are generally a lot cheaper than the UK

Pulaski

And many of them are utter crap, very poor facilities, teachers of dubious ability, and parents are expected to provide volunteer labour. Many, probably most, are heavily influenced by religious leanings. Many are also very small, providing fewer opportunities for sports and theatre.

There are dozens in the area near me, and yet I would put my daughter in a public (state) school rather than 90% of the private schools near me. FWIW my daughter is in a private school.

Jerseygirl

That's not what we found when we moved our daughter from private school in the UK to private school in NJ.

nun

As the property is in the UK you must pay HMRC first, they have primary taxing authority. Because you will be a US resident the IRS will also tax your rental income, but you will get credit for the UK tax you pay.

If there is any possibility of you selling your UK home while in the US I would do that before you leave the UK to avoid the possibility of a large CGT bill. If you really don't want to sell you home and will be returning to it then go ahead and rent it, dealing with the income tax on the rental income isn't too bad.

Watch out for other potential tax "gotchas" when you become a US tax resident like owning UK investment trusts outside of pension plans and having to pay tax on gains inside any ISAs that you have. Also you might have to report any foreign assets to the IRS and US Treasury.

One of the goo things is that you might qualify to pay Class 2 voluntary NI while in the US.

kins

The private school in my town is $35k a year.

The private schools we looked at in Orlando (and by that I mean the three that we looked at seriously, as opposed to the many religious schools) were $15-20k a year. From interviewing the staff and doing tours, it looked like they would get a similar standard of education in the private schools to what they are already receiving in our local state school in this bit of Maine.

Children start school between 5 and 7 depending on when their birthdays fall and whether or not their parents hold them back a year.

I guess the only other thing I'd add is that for us it cost about $15k to move country as a family, so if you are thinking of moving to the US for a few years then make sure the company covers your moving costs both ways. If they are then it could be a fun thing to try out.