Inheriting Property Abroad - Tax implications
#1
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Joined: Dec 2023
Posts: 25
Inheriting Property Abroad - Tax implications
Green card holder and UK citizen here.
I am thinking about getting a US passport and moving back to the UK or Germany for a few years.
The question is, at some point in the future, I will inherit property and money in the UK, likely totaling about $300k-$500k. Will I need to pay any US taxes on inheritance, in addition to whatever UK taxes?
Thank You.
I am thinking about getting a US passport and moving back to the UK or Germany for a few years.
The question is, at some point in the future, I will inherit property and money in the UK, likely totaling about $300k-$500k. Will I need to pay any US taxes on inheritance, in addition to whatever UK taxes?
Thank You.
#2
Re: Inheriting Property Abroad - Tax implications
No IRS taxes on an inheritance provided the deceased’s funds are not held within a trust. You will have to complete Form 3520 if the inheritance exceeds $100K but that is for reporting purposes only. With that size of an inheritance you will of course be subject to FBAR reporting and Form 8938 if you receive the proceeds into a foreign account. And, of course as a USC you will want to steer clear of investing the proceeds into any kind of foreign mutual account, and will have to report all interest, dividends, etc from any type of foreign account and pay tax on them. Who you pay tax to will depend upon the type of income and where your tax residence is. Becoming a USC has its advantages but will complicate your tax situation considerably,
#3
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Joined: Dec 2023
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Re: Inheriting Property Abroad - Tax implications
No IRS taxes on an inheritance provided the deceased’s funds are not held within a trust. You will have to complete Form 3520 if the inheritance exceeds $100K but that is for reporting purposes only. With that size of an inheritance you will of course be subject to FBAR reporting and Form 8938 if you receive the proceeds into a foreign account. And, of course as a USC you will want to steer clear of investing the proceeds into any kind of foreign mutual account, and will have to report all interest, dividends, etc from any type of foreign account and pay tax on them. Who you pay tax to will depend upon the type of income and where your tax residence is. Becoming a USC has its advantages but will complicate your tax situation considerably,
#4
Re: Inheriting Property Abroad - Tax implications
As a USC you would have to report to the IRS all capital gains (and all income) received no matter where in the world it originates. The UK will also require that capital gains be paid on UK property sales no matter where in the world you are living (if it was not always your own home while you owned it). The UK would get first dibs on the capital gains tax on the property and you would get credit from the IRS for any tax paid to the UK, therefore the net result will be that you owe the highest amount of tax due in either country such that if the UK bill is higher than the IRS bill then there will be nothing additional to pay, but if the IRS bill is higher than the UK bill then you will have to pay the IRS the difference. The US will allow a stepped up basis on the inherited property meaning that the cost value to you will be the value on the date you inherited it, and I think the UK allows that as well, so either way the capital gains upon sale may not be significant. These links may help you further research the UK rules.
https://www.gov.uk/capital-gains-tax...ut-need-to-pay
https://www.gov.uk/report-and-pay-yo...ital-gains-tax
https://www.gov.uk/tax-sell-property
https://www.gov.uk/capital-gains-tax...ut-need-to-pay
https://www.gov.uk/report-and-pay-yo...ital-gains-tax
https://www.gov.uk/tax-sell-property
Last edited by Glasgow Girl; Jan 9th 2024 at 12:07 am.
#5
Just Joined
Thread Starter
Joined: Dec 2023
Posts: 25
Re: Inheriting Property Abroad - Tax implications
As a USC you would have to report to the IRS all capital gains (and all income) received no matter where in the world it originates. The UK will also require that capital gains be paid on UK property sales no matter where in the world you are living (if it was not always your own home while you owned it). The UK would get first dibs on the capital gains tax on the property and you would get credit from the IRS for any tax paid to the UK, therefore the net result will be that you owe the highest amount of tax due in either country such that if the UK bill is higher than the IRS bill then there will be nothing additional to pay, but if the IRS bill is higher than the UK bill then you will have to pay the IRS the difference. The US will allow a stepped up basis on the inherited property meaning that the cost value to you will be the value on the date you inherited it, and I think the UK allows that as well, so either way the capital gains upon sale may not be significant. These links may help you further research the UK rules.
https://www.gov.uk/capital-gains-tax...ut-need-to-pay
https://www.gov.uk/report-and-pay-yo...ital-gains-tax
https://www.gov.uk/tax-sell-property
https://www.gov.uk/capital-gains-tax...ut-need-to-pay
https://www.gov.uk/report-and-pay-yo...ital-gains-tax
https://www.gov.uk/tax-sell-property
#6
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Joined: Jan 2016
Posts: 1,173
Re: Inheriting Property Abroad - Tax implications
No IRS taxes on an inheritance provided the deceased’s funds are not held within a trust. You will have to complete Form 3520 if the inheritance exceeds $100K but that is for reporting purposes only. With that size of an inheritance you will of course be subject to FBAR reporting and Form 8938 if you receive the proceeds into a foreign account. And, of course as a USC you will want to steer clear of investing the proceeds into any kind of foreign mutual account, and will have to report all interest, dividends, etc from any type of foreign account and pay tax on them. Who you pay tax to will depend upon the type of income and where your tax residence is. Becoming a USC has its advantages but will complicate your tax situation considerably,