Originally Posted by pritesh_a

….%. 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?

Originally Posted by robtuck

Basics - sell within 18 months to avoid all CGT, sell within 3 years to avoid USA shellacking.
We kept our HSBC account open in the Uk for mortgage and spoke to them in branch to get permission to rent without changing the mortgage.
HMRC will be interested - you will need to report your rental income to them via self assessment

Originally Posted by Pulaski

OK, that makes sense, however the reality of US taxation of rental income, with deductions for ....., mileage/ travel to the property (I'm not sure I would try to claim transatlantic airfares though!).....

Originally Posted by 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?

Originally Posted by Pulaski

There has been at least one other person here on BE who got caught by the gain on a foreign currency mortgage. It might seem unfair, and it probably is a shock, but the IRS rules are clear and predictable, and the FX gain on a mortgage is a well known (in international tax prep circles) as a very real issue. It is part of the US tax code, and therefore unavoidable after the fact (there are mitigation techniques available for some taxes, but you prepare for them ahead of the transaction, they don't work afterwards).

Correct, you have to pay your tax bills.

Originally Posted by jammiie

Even then they would still be subject to tax on any foreign mortgage gain, which can be particularly high if the mortgage was taken out pre-Brexit referendum when the exchange rate was much higher.

Originally Posted by pritesh_a

Was this only picked up because I switched mortgage provider in 2018? I'm just curious because I had my property in 2017 and didn't have to pay any foreign mortgage gains?

Originally Posted by pritesh_a

I've pretty much resigned myself to having to pay the bill. It was silly of to me ask if I "have to pay"
I'd like to prepare for next year and so without going into detail (I'll likely be seeking specialist tax advice) I'd be grateful if you could summarise the mitigation techniques?

Originally Posted by Cook_County

There are several options; the figure of US$26,000 is not going to be the only possible outcome. Case law on this is complex; you might wish to instruct a different adviser who can run through all of the possible iterations.