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Selling Foreign Property Tax Help

Selling Foreign Property Tax Help

Old Apr 24th 2022, 6:29 pm
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Default Selling Foreign Property Tax Help

A Brit living in NYC and looking to sell my London property. Looking for some sensible tax advice on the tax ramifications of this and run the numbers. Struggling to find a tax consultant that offer this type of help? Thank you!
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Old Apr 24th 2022, 8:39 pm
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Default Re: Selling Foreign Property Tax Help

I think this article covers most of it - https://www.investopedia.com/ask/ans...inhomesale.asp

assuming you have owned it for more than a year, then tax rate is between 0 and 20%, depending on your income during the year you sell.

if it was your primary residence for 2 of the last 5 years, then you get some relief on the gains.

if you rented the property out then it gets a little more complex because you have to account for the depreciation that you would have taken and this has to be recaptured, ie you have to pay tax on that depreciation now. Another good article https://learn.roofstock.com/blog/ren...tion-recapture. Note the depreciation on foreign property is calculated over 40 years. If you had been renting the property you should already have the calculations and amounts of the depreciation on your previous tax returns.
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Old Apr 24th 2022, 10:19 pm
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Default Re: Selling Foreign Property Tax Help

You will be subject to Capital Gains on the sale in the UK if you are no longer a UK tax resident, and you must declare the sale to HMRC within 30 days of the sale. You will also be subject to US capital gains if you have not lived in the property for 2 out of the past 5 years. You will get credit in the US for any tax paid to the UK. The net result will be that your total tax bill will be the higher of the two amounts but not the total of the two amounts. It’s actually not too complex. A good real estate agent in the UK should be able to help you at that end, and declaring the sale on your taxes in the US is not hard, assuming you have been declaring any rental income in prior years. In any case convert the purchase price to USD using the exchange rate at the time of purchase, and the same with the selling price on the date of the sale. The difference is your gain which will be taxed at normal capital gains rates. Turbo Tax is pretty good at handling the US side of things, you just have to figure in the exchange rate for it to work.

You also have to determine if you have a foreign currency gain on any mortgage pay off. To calculate that take your mortgage amount at pay off, calculate what it was in USD using the exchange rate on the date of origination, take the same pay off amount and translate into USD at the exchange rate on the date of pay off and subtract that from the first number. If the result is positive you have a foreign currency gain which will be taxed at ordinary income levels. If negative there is no foreign currency gain but no deduction or any benefit from a negative amount. The theory is that you made a foreign currency gain because you needed less USD to pay off your mortgage than you did when you originated it.

A decent domestic CPA should easily be able to help with the house sale, including any ramifications if you have rented it out, and potential foreign currency gain.


Historical exchanges rates are easy to find on the internet, they can be approximated, don’t have to be exact so long as you have a sound explanation for why you used what you did
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