Green card and tax implications for UK property & rental income
Hey folks,
My wife and I have been in the US for a few years now and are finally on our way to green cards that are hopefully just 6 months away. I hadn't really given it much thought but it seems there are going to be tax implications of this and I'm now wondering if there are things I should be doing in preparation. The main issue is that I own a property back in central London. It has a large mortgage but also a lot of equity. It's been rented out since I bought it 10 years ago and the rental income more than covers the mortgage payments. My main concerns are around 1) the tax liability post green card on the rental income which is approximately $30k/yr half of which is interest on the mortgage 2) what would happen if I decided to sell the property in the future, there would be capital gains payable in the UK, what kind of liability would I be on the hook for in the US? Are there any things I can realistically do now to try and negate double taxation in the future? Any advice greatly appreciated! Cheers |
Re: Green card and tax implications for UK property & rental income
Welcome to BE and good luck with it!
Though have a look down a bit, as this subject has come up quite recently, quite a few times. Should be able to find those threads to get you going :) |
Re: Green card and tax implications for UK property & rental income
I think you may have been liable for taxes against that rental income for prior years as a US resident. Hopefully someone else can clarify. Also you would probably be liable for US CGT. I assume you have been filing your UK taxes for your rental income.
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Re: Green card and tax implications for UK property & rental income
Originally Posted by programatic
(Post 11994712)
Hey folks,
My wife and I have been in the US for a few years now and are finally on our way to green cards that are hopefully just 6 months away. I hadn't really given it much thought but it seems there are going to be tax implications of this and I'm now wondering if there are things I should be doing in preparation. The main issue is that I own a property back in central London. It has a large mortgage but also a lot of equity. It's been rented out since I bought it 10 years ago and the rental income more than covers the mortgage payments. My main concerns are around 1) the tax liability post green card on the rental income which is approximately $30k/yr half of which is interest on the mortgage 2) what would happen if I decided to sell the property in the future, there would be capital gains payable in the UK, what kind of liability would I be on the hook for in the US? Are there any things I can realistically do now to try and negate double taxation in the future? Any advice greatly appreciated! Cheers |
Re: Green card and tax implications for UK property & rental income
You probably want to clean up your taxes before LPR, I am not sure if you have to declare that you have paid all taxes owed.
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Re: Green card and tax implications for UK property & rental income
Originally Posted by Owen778
(Post 11994819)
There are tax implications for the things you describe. However, those tax implications started when you became a US tax resident, which was when you first moved here, they don't start when you receive your green card.
Originally Posted by mrken30
(Post 11994825)
You probably want to clean up your taxes before LPR, I am not sure if you have to declare that you have paid all taxes owed.
For starters, if they moved out of their UK home more than three years ago they are already on the hook for a rather nasty CGT bill, not only on the increase in the value of their home, but also in respect of the fewer number of dollars needed to pay off the mortgage when the house is sold (as compared to the value of dollars they received when they took out the mortgage), thanks to the slide in the value of the pound over the past two years. :eek: |
Re: Green card and tax implications for UK property & rental income
To be clear I've been in the US as a student on J visas up until this point and not working which means I have been a non-resident alien for tax purposes, although admittedly I probably need to consult an accountant about the tax liabilities. I am not planning to sell the UK property (although it is of course an option), just trying to understand my options and whether there is anything I should be considering in this period between becoming a permanent resident.
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Re: Green card and tax implications for UK property & rental income
Originally Posted by programatic
(Post 11994856)
.... I am not planning to sell the UK property, .
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Re: Green card and tax implications for UK property & rental income
Originally Posted by programatic
(Post 11994856)
To be clear I've been in the US as a student on J visas up until this point and not working which means I have been a non-resident alien for tax purposes, although admittedly I probably need to consult an accountant about the tax liabilities. I am not planning to sell the UK property (although it is of course an option), just trying to understand my options and whether there is anything I should be considering in this period between becoming a permanent resident.
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Re: Green card and tax implications for UK property & rental income
Originally Posted by programatic
(Post 11994856)
To be clear I've been in the US as a student on J visas up until this point and not working which means I have been a non-resident alien for tax purposes, although admittedly I probably need to consult an accountant about the tax liabilities. I am not planning to sell the UK property (although it is of course an option), just trying to understand my options and whether there is anything I should be considering in this period between becoming a permanent resident.
And hopefully someone with more knowledge of renting UK property as an expat will be along soon to help with your original question. |
Re: Green card and tax implications for UK property & rental income
Originally Posted by Bob
(Post 11994865)
If you've not been paying your US taxes as a J visa body but stay past that period allowed, you're liable for back pay of those taxes you would have paid, for not leaving the US. Something to be aware of.
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Re: Green card and tax implications for UK property & rental income
Originally Posted by programatic
(Post 11994712)
Hey folks,
My wife and I have been in the US for a few years now and are finally on our way to green cards that are hopefully just 6 months away. I hadn't really given it much thought but it seems there are going to be tax implications of this and I'm now wondering if there are things I should be doing in preparation. The main issue is that I own a property back in central London. It has a large mortgage but also a lot of equity. It's been rented out since I bought it 10 years ago and the rental income more than covers the mortgage payments. My main concerns are around 1) the tax liability post green card on the rental income which is approximately $30k/yr half of which is interest on the mortgage 2) what would happen if I decided to sell the property in the future, there would be capital gains payable in the UK, what kind of liability would I be on the hook for in the US? Are there any things I can realistically do now to try and negate double taxation in the future? Any advice greatly appreciated! Cheers To your questions, the UK would continue to have first bite of the cherry of any tax due on rental income. The US gets second bite of the cherry, so you declare the profit and claim tax credit for any tax paid in the UK. If you didn't pay tax in the UK because it is below personal allowance, then you pay tax on the full profit in US. Capital gains tax will be much the same. You don't need to do anything to negate double taxation because there is a dual tax treaty in place that does just that. If however it is true that your US visa means you don't pay US tax then indeed it might be better to sell before that changes and hopefully UK personal allowances will cover much of the gain. |
Re: Green card and tax implications for UK property & rental income
Originally Posted by Bermudashorts
(Post 11995015)
.... To your questions, the UK would continue to have first bite of the cherry of any tax due on rental income. The US gets second bite of the cherry, so you declare the profit and claim tax credit for any tax paid in the UK. If you didn't pay tax in the UK because it is below personal allowance, then you pay tax on the full profit in US. .....
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Re: Green card and tax implications for UK property & rental income
Originally Posted by Owen778
(Post 11994869)
I've just been looking through a few related IRS documents, and I've seen no reference to that. Do you have a link?
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Re: Green card and tax implications for UK property & rental income
Originally Posted by Bob
(Post 11995971)
You'll have to search out posts by Caleyjag, I think it was, who posted a fair bit of info on the subject, because he was caught out by it when he decided to stay on.
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