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Tax question and double taxation treaty

Tax question and double taxation treaty

Old Mar 27th 2018, 10:16 pm
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Default Tax question and double taxation treaty

Hi, We moved to the US when my husband retired 3 years ago. We have a couple of properties in England that we rent out which is our main income. It seems since we have been here we are paying tax in both countries and cant seem to sort this out. Isn't there a double taxation treaty or something so this doesn't happen. We pay an accountant in England and one here in the States but they cant seem to work it out yet so we carry on paying tax twice! Is this normal? I would be grateful for any suggestions please if there is anyone else in the same boat.
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Old Mar 28th 2018, 12:05 am
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Default Re: Tax question and double taxation treaty

Originally Posted by Carsa View Post
Hi, We moved to the US when my husband retired 3 years ago. We have a couple of properties in England that we rent out which is our main income. It seems since we have been here we are paying tax in both countries and cant seem to sort this out. Isn't there a double taxation treaty or something so this doesn't happen. We pay an accountant in England and one here in the States but they cant seem to work it out yet so we carry on paying tax twice! Is this normal? I would be grateful for any suggestions please if there is anyone else in the same boat.
Nope, that is not normal. I am in a similar boat, if I pay any tax in the UK as it relates to my properties, then it is included on my US return as a foreign tax credit. You should be able to include a foreign tax credit on your US return for any tax you have paid in the UK on the profit that relates to your UK properties. Also, if you are eligible (such as being a UK citizen) you still get your UK tax allowance, so 11500 (or 23000) of the profit is not taxed in the UK.

Keep in mind that calculation of profit is slightly different between the UK and the US, the US has different rules on maintenance costs and the US also require that you depreciate the value of the buildings - but hopefully, your US accountant did all that.

Obviously, everyone's situations are different so there might be a reason why you are getting taxed in both countries. If you do a search on the forums I am sure there were some recent recommendations of tax accounts who covered both countries, which has the advantage if dealing with one person.
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Old Mar 28th 2018, 7:05 am
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Default Re: Tax question and double taxation treaty

The tax treaty has no effect. US domestic law gives a credit for foreign tax. Hopefully you are filing and reporting the income and expenses in both countries; and are claiming a depreciation expense on the buildings (not land) in the US.


Are you remembering to pay HMRC by 31 December each year (rather than in January)?
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Old Mar 28th 2018, 12:06 pm
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Default Re: Tax question and double taxation treaty

Yes we are doing both and yes two separate sets of accounts for the different dates. It just seems a bit unfair that we have to file for everything in two different countries. I guess we have to come to terms with paying twice and hope we get some allowances and credits.
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Old Apr 2nd 2018, 7:36 pm
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Default Re: Tax question and double taxation treaty

Originally Posted by Mercury39 View Post
Also, if you are eligible (such as being a UK citizen) you still get your UK tax allowance, so 11500 (or 23000) of the profit is not taxed in the UK.
Now you have me thinking! I have been non-resident for >5 years, no work related activities in the UK, but do have rental income, on which I receive no personal allowance and taxed at 20%.....hhmmmmm
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Old Apr 7th 2018, 5:27 pm
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Default Re: Tax question and double taxation treaty

I will go out to Fort Worth in July. My plan is to rent 2 houses and get income of say £20k. If I split it between wife and I we pay no tax in uk as its below 11k personal allowance. In USA I declare it but it just counts as part of my global income and taxed at appropriate rate. Have I got that right?
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Old Apr 7th 2018, 5:42 pm
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Default Re: Tax question and double taxation treaty

Originally Posted by Whoatemycheese View Post
I will go out to Fort Worth in July. My plan is to rent 2 houses and get income of say £20k. If I split it between wife and I we pay no tax in uk as its below 11k personal allowance. In USA I declare it but it just counts as part of my global income and taxed at appropriate rate. Have I got that right?
At a high level, yes.

Houses need to be jointly owned in UK in order to spilt the income in the UK (AFAIK). you can complete forms in the UK to stop agent (assuming you are using one) from automatically deducting income tax form the tent. You will need to still file a UK tax return, even if you don't have income tax to pay. (unless the tax office say not too, which they did in my case, but I will do the calculations each year to confirm I still don't owe)

In US you have to include depreciation of the property (not the land) into the calculations of your cost - what you can deduct from the income to arrive at the taxable amount.

In both the UK and US you can deduct costs - insurance, mortgage interest, management fees etc
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Old Apr 7th 2018, 6:30 pm
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Default Re: Tax question and double taxation treaty

Thanks Mercury, do you know what the depreciation rate is?

I'm guessing as my company pays my tax in USA and hypo taxes my UK pay, I'll pay the additional tax difference for the rent at the highest rate
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Old Apr 7th 2018, 7:23 pm
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Default Re: Tax question and double taxation treaty

Originally Posted by Whoatemycheese View Post
Thanks Mercury, do you know what the depreciation rate is?

I'm guessing as my company pays my tax in USA and hypo taxes my UK pay, I'll pay the additional tax difference for the rent at the highest rate
Since you are equalised or protected, or you certain you owe a penny in US tax on personal income; or is this non-equalised or protected? Why the highest rate? Why anything at all? What does your employer's policy say you will owe?
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Old Apr 7th 2018, 8:32 pm
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Default Re: Tax question and double taxation treaty

Originally Posted by Whoatemycheese View Post
Thanks Mercury, do you know what the depreciation rate is?
Thread about this last month.
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