Giantaxe

Yes, I think that's correct. My point was more of to be aware of this if you are going to rent then sell whilst still subject to US taxation. Some people get a nasty shock when they find that they can't exclude the portion of the gain attributable to depreciation. Of course, if you are here temporarily and then leave the clutches of US taxation, depreciation is actually a really good deal.

Ealing man in NY

OK thanks, that's what I thought which is reassuring, we get a first year US advisor as part of our relo package which should help going forward.

vespucci

Yes, this is something to bear in mind.

I think it's taxed at 25%, not as income.

Giantaxe

Ouch, you're right, which is even worse for someone with a lower marginal tax rate than that.

sadiigo

This is not true, I sold my house in November and just completed tax estimate with my tax accountant (and paid a hefty tax on FX gain from the mortgage repayment!). The depreciation claw back is treated as ordinary income, since you excluded it from the rental income before, that was also subject to ordinary income tax. The other point is that depreciation claw back applies only to the period that you were the US tax resident and claimed it in the rental deduction. In other words, IRS can only claim back on depreciation what you were allowed to deduct earlier.

Pulaski

​​​​​​​FIFY

vespucci

When I went to a CPA for my tax return and enquired about taxes if I sold my US rental property in the future, he said the depreciation would be taxed at 25%. Perhaps the tax rules for US and foreign rentals are different? I'm not a tax expert but it seems to me that if, for example, you've had depreciation of $10,000/yr for 10 years, $100,000 suddenly on top of your income would send you to a high tax bracket so you'd be penalized, paying more taxes than you got a deduction for.

sadiigo

I don't really know what to say here. I agree with your point that accumulated depreciation will raise your tax bracket but I will not be surprised if this is how IRS wanted it! I will check again with my CPA when doing the final return next month. The whole calculation and numerous tax forms make this more complicated than it should be.

While still on this subject I checked it on Google and on Investopedia site (under Depreciation recapture) it explains with a good example that the depreciation is taxed at the ordinary income tax rates. In my preliminary tax return, the depreciation is part of the ordinary income added via many forms and schedules

hfrix

Added the below to the wrong thread but I'd like to jump in and ask a question regarding the deductions allowed on UK rental income:

If the total expenses is higher than income, can I reduce this from my total income (i.e. salary earned from US employment)? Note; my total US income for 2018 was less than $100k as I moved halfway through the year.
Cheers!

Pulaski

Possibly, to a limited extent under certain specific circumstances, but that is a matter that you should direct to a tax professional, and not a "tax preparer", an actual professionally qualified tax accountant or lawyer.

​​​​​​​I know that several of the well known tax software packages are now quite sophisticated and might also have sufficient complexity to calculate how much, if any, of a rental loss can be set against your earned income.

Cape Blue

Agree with most of yours and Giantaxe's comments (esp on depreciation differences), but note the UK rental would benefit from the circa £12K pa UK tax-free allowance in UK tax terms, but would be added to the US income at the marginal rate - likely meaning a USA income tax even when no UK one at all.

Pulaski

OK, that makes sense, however the reality of US taxation of rental income, with deductions for mortgage interest, depreciation, depreciation on appliances, insurance, agent's fees, accountant's fees, marketing/advertising, repairs, maintenance (painting, cleaning, etc.), property taxes (if any), mileage/ travel to the property (I'm not sure I would try to claim transatlantic airfares though!) and possibly some other expenses if they were incurred as a direct result of owning and renting-out the property, is that there will be little or quite possibly no tax on the rental income in the US either.

Jadecat88

I don't know if I can help much with the OP question, but I'm in a similar position of moving to NYC. The issue is that I'm bringing some stuff with me, but won't have an apartment sorted before all the items arrive. So... thinking I'll have to put a lot of things in storage for a few months, until the apartment is free. I've already got the apartment ready, but just have to wait for the other occupants to leave first The prices here seem okay for a storage unit based in New York, as I think it will be $239 for a 'Medium' option. Hoping it would be just 1 month of storage! Question is, has anyone had bad experiences with self-storage? Like theft or damage, for example? Never used one before so I'm a bit hesitant.

Pulaski

I rented one in Westchester County for eight months, so just to the north of NYC, I rented one in Virginia for a year or so, and I have now been renting one for many years in NC. Self storage businesses are two-a-penny in the US and I don't ever recall hearing of them being broken into. Generally they are pretty secure, with bolted metal doors, gated access, video cameras, etc (both the one in NY and the one in VA had all the security bells and whistles). but I think that people know they are just full of people's "stuff" and not worth stealing - you've seen Storage Wars, right? And the popular rumour is that those units are "salted" with saleable items to make the show interesting

The one I have in NC is just off the side of the road, it has a metal roller door but is not behind any sort of fence or gate, but I have never had concerns about it being broken in to, and honestly if it was someone else's unit and I knew what was in it I wouldn't waste my time trying to break into it!

pritesh_a

So apologies in advance if this has already been answered in the thread. I've just received my 2018 filing and have been hit with a $26,000 bill. The company I work for files my taxes and does so late and pays the late payment penalty.

My background...UK born and raised, lived in London until February 2017 when I seconded to the US on a 3 year visa. I bought a property when I was in the UK in Nov 2015 and while in the US I refinanced my mortgage between two UK lenders on the UK property in May 2018 from a residential to buy-to-let. At the same time I also paid a lump sum deposit to reduce my LTV to 60%. To my shock my filing says I owe a combined $26,000 between the federal and state filings because of "foreign mortgage gains" which just comes across to me as NUTS!

Has anyone else been in this situation? Do I have no option but to pay?