MPT

I am considering moving to the US a couple of years down the line and I am concerned at the potential tax liability that this would create with regard to my house. I have never previously lived in the US and have no US citizenship.

From my understanding of the relevant tax codes:

Currently, in the UK, I would not pay any tax for capital gains on my primary residence.

If I were to move to the US and sold my house afterwards, it seems I would suddenly retroactively be liable for tax on all the increase since I first bought my house - even if this is a decade before I stepped foot on US soil. This is somewhat offset by the presence of tax relief up to $250k for a primary residence, but given the length of time and price growth in the UK, this relief would still leave a very high tax bill.

It seems that therefore I would be forced to sell. My question is what would the correct timing for this be, and if anyone else has a similar experience on how to organize this smoothly?

The scenarios I am seeing:

A) Travel to the US temporarily for a week to make arrangements for the move (e.g rent, shipping) before returning to the UK to complete the sale. My concern here is whether simply a temporary entry prior to receiving the money in the same year I would be moving over would make the sale liable to US tax.

B) Essentially the same as above, but timing it so that it is late in the tax year to avoid falling under the "Substantial presence test". From my understanding, if I do not pass this test (and lack a green card), I would be taxed as a nonresident for the year and thus overseas gains - regardless of timing so long as it is within that tax year - would fall outside the US tax code?

C) Selling the house and moving to rented accommodation in the UK before even setting foot in the US - the safest route, but also incurs extra costs of its own.

Does anyone have any views/experiences on something similar, or general recommendations on what to look out for in navigating this US tax minefield?

Also wondering if anyone who has moved over has any recommendations for tax advisers/accountants who would be able to assist on an issue like this?

Many thanks for any insights.

Nutmegger

I think everyone's first question is going to be, "On what visa will you be moving to the US?"

MPT

An E2 Visa, I think. Is there a difference as long as its not a green card?

jimakos

Visa has nothing to do with it.

It all depends when you enter the US, and whether you will be considered a full US tax resident when you sell.

If you are present in the US above a certain number of days (i cant remember off the top of my head) you will be filing as a full US Tax resident and therefor your global income will be taxed. Otherwise if you file as a Non resident, only US income is taxed.

An example:
If you move to the US around September 2016 and you sell before the end of the year, your 2016 tax year will be filed as a Non resident. This means only income earned within the US will be taxed (so not your 2016 UK income, house sale proceeds/gains)

If you sell in 2017 however, that would be a Resident tax year so everything goes into the pool. You will be exempt from the first 250k (USD) or 500k (if married filling jointly) and (both) lived there for 2 out of the past 5 years.

In addition, if you have a mortgage that you payoff while a tax resident, there would be reportable gain (but no loss) if there is a gain from start/payoff of the loan.

I am just going through all this myself. Not fun...

UK2toUSA

Hi

I am also in similar situation moving to USA on a green card. I am looking for answers on CGT.

How does the CGT process work ( it’s our primary house from last 2.5 years , when does CGT start in UK , what’s the process who pays the CGT to UK government , ) Any escape route …

As per USA tax laws seems like I will have to sell my house but can I sell it say after I am settled in usa ( after 2 – 3 months) and avoid any usa taxes and CGT.

All suggestions / advices on this topic are more than welcome.

Thanks
V

carlrush

For UK tax...

Normally the sale of your only or main residence is exempt, although it can become partly chargeable in some circumstances, such as if it is let out or used for business purposes. If you sell it after 5 years of being non-resident in the UK then you won't be charged by HMRC.

This article sums it all up pretty well...

http://www.telegraph.co.uk/finance/p...the-worst.html

I'm facing the same situation (green card too) and aiming to sell as close to the date I arrive in the US as possible to avoid Capital Gains Tax in either country.

Pulaski

What does that mean?

Effective April 2015, CGT will be due in the UK on the sale if you sell 18 months after you move out even if you are overseas. CGT is calculated on the gain (sale proceeds - purchase price - allowable deductions = capital gain) prorated over the period of ownership (if you owned it for 100 months, and lived in it for 80 months then 2/100 would be the taxable gain being (100-80-18)/100). I think.

Most owners are still covered by the "18 months", which expires in October 2016. Previously CGT was not assessed on non-resident (resident outside the UK) owners.

carlrush

If you live outside the UK and are considered 'non-resident' for tax purposes for a period of 5 years or more you are not liable for Capital Gains Tax in the UK. The change making people liable within the 5 year period of leaving the UK was to close a loophole of people declaring they are non-resident and paying taxes for a year in another country (see Rolling Stones or Spice Girls, depending on your age/music tastes!). During that year you were previously able to dispose of major assets (like properties) and, if you picked the right country, you wouldn't pay tax at all. i.e. UK wouldn't tax you and often the country you were in didn't charge capital gains either.

Another point to note, the gain can be calculated a number of ways in the UK and need only relate to the period from 5 April 2015 (when the change occurred) to the date of disposal. See here for more...

https://www.gov.uk/guidance/capital-gains-tax-for-non-residents-calculating-taxable-gain-or-loss#gain-over-whole-period-of-ownership