Should I stay or should I go? Future gazing tax questions..
 

Hello!

I’m looking for v brief, generalized- as much as humanly possible- tax help to aid us in making the decision of whether to commit to the States (Illinois) for ten years or to make the jump back to the UK.

We need to make a decision in the next few months and are trying to override emotion by applying hard financial facts.

The things I would love to know are:

1 - we left the UK ie started renting out the house in March 2020. If we sold it, how do we work out the US tax we would pay over and above anything in the UK, is there a relatively simple equation to guesstimate this?

2 - if we inherit money in the UK over the next ten years, how does this get taxed if brought over to the US?

3 - if we use transfer money to the US from a UK trust (currently in a parent’s name) how is this taxed?

Thankyou thankyou to anyone who can help shed a rough light on this

Re: Should I stay or should I go? Future gazing tax questions..
 

1. when we did this we sold our house about 3 years after moving to the USA so it was considered as the sale of our primary residence so the calculated cap gain went against our lifetime exemption. This was early 90's so maybe different now. While the house was rented we did a profit and loss account to calculate actual taxable income

2. We have inherited UK money while living in the US and no tax was payable in the US or UK, even after we transferred it over.

3. I don't know. (Foreign trusts are not something we have had to deal with)

Re: Should I stay or should I go? Future gazing tax questions..
 

is your lifetime exemption different to the Section 121? What is the lifetime part of it, I thought the exemption cap applied to the sale of every primary residence (subject to meeting the criteria each time)

https://www.irs.gov/taxtopics/tc701

Re: Should I stay or should I go? Future gazing tax questions..
 

As I said, I expect a lot has changed since the early 90s. Looks like there is no lifetime exception and if the op sells his home within the rules in the link you provide it will be treated as his main home and I doubt he will have any tax issues to be concern about.

Re: Should I stay or should I go? Future gazing tax questions..
 

US citizens are taxed on their world wide income

Re: Should I stay or should I go? Future gazing tax questions..
 

As are ***usually*** green card holders / legal permanent residents.

Re: Should I stay or should I go? Future gazing tax questions..
 

1 - we left the UK ie started renting out the house in March 2020. If we sold it, how do we work out the US tax we would pay over and above anything in the UK, is there a relatively simple equation to guesstimate this?
If you continue to rent the UK property whilst a US resident you will have to pay income tax on that income (but you can write off many expenses of course like insurance, agents fees etc.) You will also have to file a UK tax return and be liable for UK income tax. You will though be able to claim the UK tax paid against your US taxes so should only pay tax once (I have never really figured out if this is actually true, I always seem to end up paying tax in both places but never figured out what if anything I was doing wrong).
As for selling the property, I think that question was answered above.

2 - if we inherit money in the UK over the next ten years, how does this get taxed if brought over to the US?
Inherit away, nothing to pay in the US. Years gone by I was able to take advantage of the 2:1 USD to GBP rather effectively in this regard.

3 - if we use transfer money to the US from a UK trust (currently in a parent’s name) how is this taxed?
Foreign trusts and foreign pensions can be a world of pain. If the trust is in the parent's name then can't they take out the money and gift it to you? If you inherit the trust then that can be very tricky. You would be taxed on any income the trust receives which can get very complicated if the trust is invested in UK shares etc. This is a highly specialised area of expertise though. I ended up renouncing a (small) inherited pension because the headache was too great. I could have been liable to pay tax on it's income every year even if I couldn't actually access the funds inside.

Re: Should I stay or should I go? Future gazing tax questions..
 

Thank you so much for your help.

I’ve now spoken to a specialist and the trust is the kicker - essentially something set up to help circumnavigate U.K. tax has proven to be the issue and has made our decision for us I think.

Thanks everyone - much appreciated.