zaze

Hello, I really need some advice.

I recently moved back to the usa after moving to the uk as a child age 6. i was not aware of the filing of taxes naively, but did file back taxes for the last 4 years when i found out in dec 2010. I moved over her with my husband who is a recent PR holder and my 2 children (us/uk citizens). I have always filed returns excluding for FEI. i have been here one year and we bought a home cash in NC. This was from income mainly from my husband and sale of home 1 month prior to moving here. I am now scared that we will owe loads to the IRS for owning the home. We have only part time employment which isnt much but do you think i need a tax attorney? on my return will i be asked about property and how i own it? I am confused and worried.

md95065

You don't owe anything for "owning the home" (apart from local property taxes) - you may owe capital gains tax on the sale of your previous home but that is complicated by questions such as how long you lived in it, who actually owned it (you or your husband or both of you jointly), when you sold it, when your husband became a permanent resident and how you file your US taxes (married filing jointly or separately).

There is a US capital gains tax exemption of (I think) $250k for the sale of your principal residence - if you and your husband owned it jointly I believe that you can both claim the $250k exemption. See this IRS web page for details.

You can also offset taxes paid in the UK against your US tax liability.

Anyway, the chances are that unless you made a huge gain on the sale of your old house or you didn't live in it long enough to qualify for the exemption you probably will not owe anything.

zaze

thank you MD. I SEE what you are saying.. I filed my back taxes as single but last year as joint as my DH became a PR in August 2010. It was our main home and this will be our fist proper tax form as married with a US income albeit a small one. we have been living off savings under 20k and part time work? i just wondered if the IRS would be suspicious as we own our home outright. What if you borrowed money in the uk such as a bank loan to help with the purchase?? can you offset this??

md95065

The issue for the sale of your old house is the *gain* that you made when you sold it not how it was financed.

The "gain" is the sales price minus the "adjusted basis value" of the property (which in many cases will effectively just be the amount that you originally paid for it unless you bought it a long time ago or you made substantial improvements to the property).

The IRS don't know that you own a home or how you paid for it unless you tell them in some way - by claiming a deduction for mortgage interest for example - since you don't have a mortgage this will not apply to you and the IRS will neither know nor care.

btw if you or your husband still have a total of over $10,000 in any overseas (ie non US) bank accounts don't forget that that you have to disclose this. Disclosing those accounts does not mean that you necessarily will owe any taxes (although you should be declaring any investment income that those accounts generate), but the penalties for failure to disclose are very severe. See this page for details.

zaze

thanks for clarifying, i understand a lot better now, so the IRS neither care that i own a house here and i wont be claiming mortage interest so its not really one way or the other., i did not know about the declaration until this board actually, is this for green card holders also? i will check the link out, thank you for your help, its quite tricky if you don't look into these things . this board has been great

Michael

Normally your cost basis is the price you paid for the home plus the cost of improvements (not maintenance) and the gain is the selling price minus costs (relator and other free) minus the cost basis.

Filing jointly, there is a $500,000 exclusion from taxes on the gain if you lived in the home for at least 2 of the past 5 years.

Bob

Yes.

penguinbar

If you need someone who is very well vered on taxes for both sides of the pond I highly recommend Pete Newton. www.britishexpatstax.com
He has been doing my and my husbands taxes as well as several others on here for a while now.

zaze

Thanks, I looked him up. I may give him a call. Is he quite reasonable?

penguinbar

I don't know what you consider reasonable and I'm sure each case is different but I think Pete is reasonable. I have referred several people to him as well He is also a very nice guy and always gets back to me pretty quick. I ask alot of questions and he's very patient ! I would definitely contact him.

GeoffM

Funnily enough, was speaking to Pete just the other day, with an email from him tonight. Free consultation and he's just given me a quote. I've nothing to compare it to so I don't know whether it's high or low. But the risk of misfiling taxes to the UK and/or the US is just too much stress for me so I need to have somebody competent handle it. I won't say what the quote is, either here or in PMs as I suspect it's based on individual circumstances - and I don't have the simplest of tax affairs. It's also an ongoing Q&A kind of thing, not just an end-of-year fill-in-the-forms.

zaze

thanks, i have left him a message. I am glad the consultation is free, then he can quote us for our situation.... Great help...

penguinbar

I just set up my meeting with Pete to do our taxes agin this year. I've already asked a bunch of questions and no matter how busy he is he always gets back to me in a timely and gracious manner! I wish more people could learn to do business that way!!!

zaze

Thank you all for your replies, i am waiting to hear from Pete and I feel much better. This forum has been extremely useful as there is so much that you just don't know!!!