HuffPuff

Hello,

I've been trawling the internet to better understand us tax implications as a UK citizen/US Permanent Resident. I am one of those people that sees numbers, the word tax anything to do with numbers I have a complete block soooo I'm really hoping to open up a dialogue here to better understand a few things I'm also someone who lays every single option out to try and understand the full picture before diving into anything, regardless if the option is something I'm actually going to do - you never know where things will lead you Oh and I should also mention I turn 40 next week and like clockwork I can feel that midlife crisis kicking in I have lived in the US for 9 years - I currently have no property in either UK or USA - if it's ok I'd like to drop some potential scenarios below and I would love if someone could help me understand the implications of each


Buying a Home in the UK - I have been offered financial assistance by a family member if I choose to purchase a home in the UK (it would be around 20-25k in gbp) to my UK bank account
Would I have to pay anything to the US for receiving this gift?

If in lets say 10 years time I decide to move back to UK and revoke all ties to the US - what sort of tax/gains etc would I pay to the US on sale of the UK home? If I was a perm resident during purchase, and then revoked that during ownership of the home and sold once it was revoked?

Buying a Home in the US - If I purchased a home in the US and again revoke perm residency how or would that affect the ownership of my home, would any of my obligations change in terms of I guess the tax category I fall under. If I sold this property how would my obligation change as a perm res / revoked perm res

Inheriting Property in UK - I have some family members who own property in the UK and France who are discussing passing this as inheritance - what sort of tax/capital gainst/inheritence obligations would I face? Is there somewhere we can calculate this? Is it based on the purchase price, current value, or amount if sold? What happens if it is not sold? What would happen if I inherit the property, keep the property and then pass this property on to a younger family member who is only a uk citizen would it bypass any obligations to the US?

Income from Property - If I owned a property in the UK and or US and rented them out but did not make any profit, i.e. the rent covers mortgage and basic upkeep - what liability in terms of tax obligations would stand?

Would anything here differ as a us/uk dual citizen vs the perm res status?

I would be so grateful for any input here and to better understand all the implications good and bad

Glasgow Girl

There is no IRS inheritance tax but there is an Estate Tax payable if the deceased is subject to US taxes, and if that is the case then state tax is also payable. The tax is deducted from the deceased’s estate, the recipients themselves have no US tax liability. In any case the Estate Tax only applies to estates above 11 million dollars for an individual, double that for a married couple. Similarly, gift tax only applies if the person giving the gift is subject to US taxes, the recipient has no US tax liability. A person subject to US taxes can gift $16,000 per year to individuals before the gifter has to pay tax on the gift. These are some of the very few areas where the IRS are friendly to foreign income. Democratic administrations are usually keen to tax inheritances and gifts much harder than the current rules, so keep you eye on those limits in future years.

if you sell a home while subject to US taxes, no matter where in the world it is located you are subject to capital gains taxes on any gain over $250K if single or $500K if married so long as you lived in the property for 2 out of the last 5 years. If you do not meet the 2 out of the last 5 year criteria then all of the gain is subject to capital gains taxes. If you sell a property located in the US you are subject to the same rules regardless of whether or not you are otherwise subject to US taxes, in other words revoking your permanent residence status will not enable you to avoid that tax. If you sell a property in the UK while you are not otherwise subject to US taxes then there is no tax to pay to the IRS.

if you rent a property no matter where in the world it is located while you are subject to US taxes then you will have to declare all income on your US tax return whether or not it is profitable. You will also declare your expenses and depreciation and the difference will be taxable. If you rent a property located in the US and you are not otherwise subject to US taxes the default tax rate is 30%.

HuffPuff

Thank you so much, this was extremely helpful!

durham_lad

I don't think this is exactly correct. If you gift more than $16k in a given year you don't have any tax to pay but you do have to file IRS form 709 This gift is then recorded against your lifetime Estate Tax exemption (currently $11m for a single filer). Tax, if owed, is then only paid on the gift by the giver's Estate after they die. (I've had to do that once in the past when I gifted money to my son to help him buy a house)