Rockgurl

I have done a search but can't quite see anything relevant to my situation so I was hoping I could get advice from someone with experience.

I am hoping to buy a house here in the USA and want to pay off my UK and US credit cards before I do so. I have a sum of money in the UK in my bank account from my house sale, an endowment policy that I want to sell and I also have some money in an offshore account from the sale of my fathers home in Spain after his death in 1999. I want to bring everything over to the US, pay off any debt and start to invest over here.

• Firstly, will I have to pay tax on the money from my house sale if I transfer it into my US bank account (about £40,000)? If I do, how does that work? Do I just transfer it over and wait for a letter from the tax people or do I actively declare it in my tax return.
• Will I have to pay tax on the sale of my father's home that my sister and I sold after his death and placed in an offshore account? Should I transfer that to England and then transfer it all with my other money claiming it as one lump sum, or transfer it to the US directly?
• Would you recommend selling an 9 yr old endowment policy that is slightly underperforming but is now no longer needed for mortgage purposes? I figured that the £137 a month I was paying would be better invested in a US Roth IRA. Would you agree?

I really appreciate your advice. Please be gentle...up until recently I was financially illiterate and have only recently started to read about money and try to educate myself to get the best out of my finances. Please assume I know nothing and don't use big words!

dunroving

I'm not an expert, but my understanding is that you will not get taxed if you are simply transferring capital from the UK to the US.

Large amounts on the other hand may draw the attention of the US Gov't for other reasons (the "T" word).

As for selling the endowment, you might look into a couple of options. Selling it on the open market may raise more money than cashing it in. Also, you may get some money from the company by writing a letter of complaint about it underperforming. There were some posts on the subject maybe a year ago.

Before cashing in a major UK investment and/or investing in the US, I'd want to be absolutely sure my future (retirement) was going to be here. So many people have changed their minds that I think it's always worth considering keeping investments in both places. I know from your past posts that you are very happy here, but one thing I've learned is that you never know what's around the corner ...

dbj1000

I'm also not an expert...

...however, once you are resident in the US for tax purposes (as you have been for a while now, I think) you must declare ANY income (e.g. from the sale of your house, your father's house or your endowment policy) in your US tax return for the year in which you had the income.

That's not to say that it'll be taxed though. You're allowed up to $250,000 income from the sale of your primary residence tax-free (check the amount and the rules for claiming "primary residence" on the IRS website).

I'm not sure about sale of your father's home and your endowment policy. Sounds to me like capital gains, and there's probably a tax associated with that. However, since there's a tax treaty between the US and the UK, you should be able to exempt some or all of that money from US taxation by claiming it as Foreign Earned Income.

Even if you can't exempt it all (there's a $70k limit, I think) it's still my understanding that you should NEVER be double-taxed on income that was taxed at source in the UK according to UK tax law. For example, severance pay here is taxed, but in certain circumstances redundancy in the UK is not taxed. In the year I filed US taxes that included my UK redundancy payment, my CPA added a special note to this effect, and it was accepted by the IRS as tax-exempt income.

In contrast, you can use US tax law to your advantage by claiming exemptions that UK tax does not allow. Mortgage interest payments on a home in the UK are a great example. There's no longer mortgage interest credit in the UK, but you can deduct any UK mortgage interest from your US taxable income when you file here, since you're treated as a US resident with a property abroad.

All of the above is my not-so-educated opinion, and I'm not a tax professional.

In a situation like this, you REALLY need to find yourself a CPA with experience of filing taxes for foreign nationals. Don't use a highstreet chain like H&R Block, and don't take a verbal assurance that the CPA knows how to work with foreign earned income.

fatbrit

You need a competent CPA experienced in your particular area. There are too many imponderables...

The Roth IRA is a good and very flexible investment vehicle.