flibiddy

Hi all

I've been in the US 6 years or so and have been renting out my flat in the UK for all that time. It's looking like I won't return there to live so I am toying with the idea of selling up. Has anyone else had experience of selling a house in the UK while living in the US? What are the tax implications? What is the best thing to do with the proceeds? Put them in a high interest account in the UK or bring it all over to dollars taking advantage of the exchange rate.

Any advice would be welcomed. Many thanks!

Big D

My tax advisor advised against selling our UK property once stateside, or to think carefully cos of tax implications. Basically you will probably be liable to tax in both countries. Sorry i don't know the specifics but it is probably worth getting some good advice.

However if you are going to keep the money invested you might be as well keeping the flat if it rents OK? The exchange rate is still reasonably good for such a transaction at the moment but the interest once you get the money here is no where near as good. So you will need to do some calculations based on how much you are likely to realise. You will probably get investigated as a money launderer as well!!!!

BritGuyTN

actually from what i've read and been told by my tax bloke, as long as you are non-resident for tax in the UK, the proceeds of a property sale in the Uk when you live in the usa are taxed at 15% of the profit as long as you have held the property three years (I think)

Big D

Confusing isn't it? I'm really not sure where i am resident for tax purposes these days!!!!

ladylisa

Thats easy, you are classed as a UK resident if you spend at least half of the tax year there, or regularly spend a quarter of each tax year there. Tax year running from 6th April to 5th April. Day of departure and day of leaving are not counted.

I think its a cheak having tp pay the US government 15% of your house profits. They didnt help you to make that money!

BritGuyTN

I agree

but its only like this with investment properties - if you have lived in the house for x years out of the preceeding x years then you get a $250,000 allowance on profits - as a married couple you get $500,000 which i think is pretty generous

i just mentioned the 15% as the OP mentioned he had not lived in it for a while

g1ant

So don't tell them. Then you pay nothing.

Tell 'em nowt.

Alex.

dbj1000

Tax-wise it's a very simple situation, and I posted the answer recently in two places. I've copied my responses to save you the massive trouble of using the Search function

If it was your primary residence, you lived in it for more than two years, and made less than $250k profit on the sale ($500k for a married couple), then it need not be reported on your tax return. Over $250k it is subject to capital gains tax. If you lived there less than two years, the proceeds of the sale are pro-rated by the amount of time you lived there.

According to the IRS Website FAQ the income from the sale need not be reported unless the conditions I listed (owned and lived in it for more than 2 years, and made less than $250k/$500k on the sale) are not met. The CPA who did my tax return this year didn't list my UK home sale income anywhere.

However do remember that you can also exclude UK property tax (Council Tax) from your US tax. The same applies to mortgage interest paid on a mortgage in the UK. Also, I was able to exclude a huge early-redemption penalty on my UK mortgage, since that is treaded as a one-time advance interest payment if it is not for a particular service from the mortgage company.

I hope this helps. Feel free to karma me if it does

dbj1000

Huh? I missed this on the first read.

The IRS has a pretty clear and concise definition of whether you're resident in the US for tax purposes.

If you meet the Substantial Presence Test then you're resident in the US for tax purposes. Your visa status has no effect on your tax status, although if you have a Green Card you are automatically resident for tax purposes too.

That's generally a good thing. If you're not resident for tax purposes then you cannot claim the vast majority of tax exemptions available to US residents. Given that you can exclude a reasonable amount of foreign-earned income, can't be double taxed in the UK and US (due to our tax treaty) and can deduct things like mortgage interest which aren't deductible in the UK, it seems there are few reasons to try to be a non-resident alien on your tax return here, given that you still have to file one!

mvjenno

Cheers for this re-assuring info...karma sent!

Lottie

My big question, is what are my UK tax implications when selling a house - even if I'm a resident in the US for tax purposes.

Elvira

Just wanted to chip in that if the UK house is rented, then mortgage interest IS an allowable expense for UK tax purposes, as are the usual maintenance costs (insurance, repairs, agents' fees etc.).

If the house is let furnished, 10% of the rent can also be offset against tax.

dbj1000

In the UK, it seems that sale of your principal residence is exempt from Capital Gains tax.

Some details here, or you can do exactly what I did and type "capital gains sale home uk" into Google. Took me all of 10 seconds!

strim

Heres my 2 cents worth

I wouldn't recommend putting the proceeds in a high interest account. Even the best accounts only offer paltry returns and over the time the value of the money won't increase as fast as stocks or property, effectively devaluing it. I would ship it over here while the exchange rate is good, buy a property in the US while the prices are still rising. (bubble, what bubble) Then in a few years you will probably have seen an appreciation in the house price, benefited from no rent payments and if the exchange rate is lower, which is quite possible given how high it is now, make some more money shipping the funds back to the uk.

I would check out the tax situation with a tax advisor. I have read that as part of the uk/us tax treaty you should pay taxes in the country where the real estate is located

Good luck!
.

flibiddy

Thanks all - it sounds like there are many pitfalls out there. It probably is better to hold on to property. Also I live in Raleigh, NC where property prices aren't quite so out of control as they are in other parts of the US.

Thanks again...