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Tax on house sale proceeds when moving to USA

Tax on house sale proceeds when moving to USA

Old Feb 28th 2011, 1:55 pm
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Default Tax on house sale proceeds when moving to USA

Hi,

I hope I am not duplicating anything which has previously beed posted/answered, cannot help thinking this is a common one.

I am married to a US citizen and will be moving to the US in May this year, my house is up for sale here and it will produce around £200,000 in net equity which of course is not taxable in the UK. If I move this money to the US to buy a house of the same value, am I liable for US tax?

Would be very appreciate of any advice.....
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Old Feb 28th 2011, 8:51 pm
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Default Re: Tax on house sale proceeds when moving to USA

Welcome to BE!

Have a search, quite a lot of threads on capital gains tax, especially recently with tax season.

I don't know the answer as it's not a concern of mine. Though what can and is a consideration is the status in which you enter the US at the time of the sale.
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Old Feb 28th 2011, 9:12 pm
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Default Re: Tax on house sale proceeds when moving to USA

There is a $250,000 ($500,000 if married and filing jointly) exclusion on capital gains on the sale of a primary residence (lived in for 2 or the past 5 years). It doesn't matter if you purchase a new home or not and moving money doesn't have a bearing on tax.
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Old Mar 1st 2011, 6:39 am
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Default Re: Tax on house sale proceeds when moving to USA

Thank you both for your replies, sounds like we would be wise to get some tax advice sooner rather than later.
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Old Mar 1st 2011, 6:25 pm
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Default Re: Tax on house sale proceeds when moving to USA

But if you sell the house after 5 years you are subject to tax on the profits - which is the difference in price you bought the house for originally converted into USD, and the price you sold it for in USD. The USD rate is the rate on the date you bought/sold the house. You can also factor in any major renovations/extemsions. We were told that the tax on the profit is in the region of 15% plus your local state tax.
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Old Mar 1st 2011, 6:38 pm
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Default Re: Tax on house sale proceeds when moving to USA

Originally Posted by katybluewater View Post
But if you sell the house after 5 years you are subject to tax on the profits - which is the difference in price you bought the house for originally converted into USD, and the price you sold it for in USD. The USD rate is the rate on the date you bought/sold the house. You can also factor in any major renovations/extemsions. We were told that the tax on the profit is in the region of 15% plus your local state tax.

Is this applicable to him before or after he becomes a PR and what are the consequences if it is sold while he is still living in the UK as opposed to living in the US and selling it.
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Old Mar 1st 2011, 6:57 pm
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Default Re: Tax on house sale proceeds when moving to USA

Originally Posted by mikechristina View Post
Hi,

I hope I am not duplicating anything which has previously beed posted/answered, cannot help thinking this is a common one.

I am married to a US citizen and will be moving to the US in May this year, my house is up for sale here and it will produce around £200,000 in net equity which of course is not taxable in the UK. If I move this money to the US to buy a house of the same value, am I liable for US tax?

Would be very appreciate of any advice.....
The first thing to get clear on is understanding the capital gains rules (www.irs.gov) the second is that YOU are not obligated to the IRS until you become a Permanent Resident. That happens when you arrive to the US with the *correct* visa (as discussed in your other thread).

You two will definitely want to take a crash course in US tax law and hire some help for your first year's US tax return. It's a nightmare, but it gets a little better after the first year.
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Old Mar 1st 2011, 7:05 pm
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Default Re: Tax on house sale proceeds when moving to USA

"I am married to a US citizen and will be moving to the US in May this year". As you now know from your other post, you'll be moving over here once you've been granted your CR-1 visa. It may not be as soon as May.
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Old Mar 1st 2011, 8:51 pm
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Default Re: Tax on house sale proceeds when moving to USA

My wife is going to call the IRS from her side to undertstand the tax position on my house proceeds - might as well get it from the horses mouth.
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Old Mar 1st 2011, 9:21 pm
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Default Re: Tax on house sale proceeds when moving to USA

Having just done our 2010 taxes, anything sold in UK prior to becoming a PR (having a green card and beholden to Uncle Sam tax-wise) is not considered under capital gains here in USA. Its all in the green card test - IRS publication 519. http://www.irs.gov/publications/p519/ch01.html

You are not liable for US taxes by virtue of being married to a USC (although USA would probably love that!) - its all about your green card entry date and the date of the house being sold. (Contract vs. closing date, which we found out as well...)

IRS employees cannot be held liable for their information, but its worth a call for sure...and the IRS folks at the London office are easy to reach and very nice indeed!
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Old Mar 9th 2011, 9:35 am
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Default Re: Tax on house sale proceeds when moving to USA

Hi Bomjeito,

I am re reading your post re my tax position on the sale of my house.

I have the option of selling it now or waiting until I am a Permanent Resident, BUT have the added complication which I explained in another thread - basically in my divorce, my ex got the family home and me the holiday home - so is not my permanent residence, though I have been without a home due to the recession since Jan 2009 (big ahh I know!).

So the UK tax man will want 28% if I sell it whilst still here (not an option for me) what I dont know is the US tax mans view on the sale of this house, which is my ONLY asset and my only way of rehousing myself - do you see my frustration here?

I am in a bit of a quandary as to what to do? Tbe house has just been valued @ £395,000, I have equity of around £240,000.


Best regards


Mike
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Old Mar 9th 2011, 6:29 pm
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Default Re: Tax on house sale proceeds when moving to USA

Originally Posted by mikechristina View Post
Hi Bomjeito,

I am re reading your post re my tax position on the sale of my house.

I have the option of selling it now or waiting until I am a Permanent Resident, BUT have the added complication which I explained in another thread - basically in my divorce, my ex got the family home and me the holiday home - so is not my permanent residence, though I have been without a home due to the recession since Jan 2009 (big ahh I know!).

So the UK tax man will want 28% if I sell it whilst still here (not an option for me) what I dont know is the US tax mans view on the sale of this house, which is my ONLY asset and my only way of rehousing myself - do you see my frustration here?

I am in a bit of a quandary as to what to do? Tbe house has just been valued @ £395,000, I have equity of around £240,000.


Best regards


Mike
As per the other thread - its the profit that the UK will CGT, not the equity.

You have a one-off GBP40K allowance, plus your annual allowance, you can carve-off 3 yrs of capital gain if you move back-in for a short-time and I think there is an inflationary allowance - you will end up with with a lot less than 28% tax paid in the UK.
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