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PaulineMurray Jan 21st 2017 5:14 pm

Tax Return Advice
 
Hi All,

I know this question has probably been asked a million times but I know how knowledgeable you guys are so I just wanted to ask a specific question relating to the sale of our UK home.
My husband moved to the US on the 20th Dec, 2014 on a L1 visa and myself and children moved in Feb, 2015. We initially rented out our home which was our primary residence from 2009. Our tenants moved out in Dec, 2015 and this was put down on last years tax returns. We then sold the property in Apr, 2016 and made very little money when looking at the purchase and sold price. I just wanted to clarify, from what I have read so far, is that we do not have to put this on our tax return as we sold it within the 18 months and had lived in the property for 5 years and made no way near the $250k for GCT. I am so hoping that you guys will be able to clarify this for me.
Thanks.

nun Jan 21st 2017 6:15 pm

Re: Tax Return Advice
 
If you have lived in the house you sold for two out of the last 5 years then you get a US capital gains tax allowance on the sale of $500k if you are filing married, jointly. Don't forget to include the exchange rate changes in your calculation.

PaulineMurray Jan 21st 2017 7:28 pm

Re: Tax Return Advice
 

Originally Posted by nun (Post 12157739)
If you have lived in the house you sold for two out of the last 5 years then you get a US capital gains tax allowance on the sale of $500k if you are filing married, jointly. Don't forget to include the exchange rate changes in your calculation.

Thank you, Nun we definitely fall into this catagory even with the exchange rate changes. Do you know if it still needs to be put on the tax return as the websites I have looked at say we don't need to put it down and I just want to be sure. Thanks.

nun Jan 21st 2017 11:04 pm

Re: Tax Return Advice
 

Originally Posted by PaulineMurray (Post 12157790)
Thank you, Nun we definitely fall into this catagory even with the exchange rate changes. Do you know if it still needs to be put on the tax return as the websites I have looked at say we don't need to put it down and I just want to be sure. Thanks.

You should work through the IRS worksheets and file the Schedule D and 8949 showing zero taxable gain. Look at the example on page 6 of the instructions for 8949. If you use software like TurboTax it will all be taken care of.

kodokan Jan 22nd 2017 5:47 am

Re: Tax Return Advice
 

Originally Posted by nun (Post 12157895)
You should work through the IRS worksheets and file the Schedule D and 8949 showing zero taxable gain. Look at the example on page 6 of the instructions for 8949. If you use software like TurboTax it will all be taken care of.

I found Turbotax very straightforward for my house sale on last year's tax return, asking simple questions to calculate tax due. Like you, there technically was none (we'd made a small exempt gain of about $10k), although TT did helpfully ask if we were likely to be selling a house for a greater profit in the next two years, because if so we might want to choose to not use our exemption on this house but keep it for another. Tax software is very informative at times!

Cook_County Jan 22nd 2017 9:18 am

Re: Tax Return Advice
 
Don't forget to calculate any currency gain on the repayment of the Sterling mortgage and to file Form 4797 to calculate the tax on the depreciation recapture for the period it was rented.

mrken30 Jan 24th 2017 5:55 am

Re: Tax Return Advice
 

Originally Posted by nun (Post 12157739)
If you have lived in the house you sold for two out of the last 5 years then you get a US capital gains tax allowance on the sale of $500k if you are filing married, jointly. Don't forget to include the exchange rate changes in your calculation.

This article may help you. The depreciation for overseas properties is 1/40th per year, straight line depreciation

http://money.usnews.com/money/blogs/...ental-property

PaulineMurray Jan 24th 2017 6:55 pm

Re: Tax Return Advice
 

Originally Posted by mrken30 (Post 12159833)
This article may help you. The depreciation for overseas properties is 1/40th per year, straight line depreciation

Tax Implications for Converting a Primary Residence to Rental Property | The Smarter Investor | US News

Thank you all for your advice, I am currently working through turbo tax and see that because of the exchange rates we actually made a
Loss. Last question when calculating the depreciation you need to deduct the land cost is there a simple way to do this as our property was in Scotland and don't ever remember having the cost of the home broken down.

mrken30 Jan 24th 2017 7:09 pm

Re: Tax Return Advice
 

Originally Posted by PaulineMurray (Post 12160437)
Thank you all for your advice, I am currently working through turbo tax and see that because of the exchange rates we actually made a
Loss. Last question when calculating the depreciation you need to deduct the land cost is there a simple way to do this as our property was in Scotland and don't ever remember having the cost of the home broken down.

The general rule of thumb is land value is about 20% of the purchase price. The UK does not separate out the different amounts.

Sometime you are able to find prices of undeveloped land with planning permission to get some idea of land value.

Cook_County Jan 24th 2017 8:22 pm

Re: Tax Return Advice
 

Originally Posted by PaulineMurray (Post 12160437)
Thank you all for your advice, I am currently working through turbo tax and see that because of the exchange rates we actually made a
Loss. Last question when calculating the depreciation you need to deduct the land cost is there a simple way to do this as our property was in Scotland and don't ever remember having the cost of the home broken down.


Don't forget to calculate any currency gain on the repayment of any Sterling mortgage.

PaulineMurray Jan 24th 2017 8:27 pm

Re: Tax Return Advice
 

Originally Posted by Cook_County (Post 12160509)
Don't forget to calculate any currency gain on the repayment of any Sterling mortgage.

Thanks, I am using turbo tax and bought the house at a higher exchange rate than when I sold it but turbo tax hasn't even mentioned payback of a mortgage, do you know how I need to show this?

Cook_County Jan 25th 2017 10:17 am

Re: Tax Return Advice
 

Originally Posted by PaulineMurray (Post 12160514)
Thanks, I am using turbo tax and bought the house at a higher exchange rate than when I sold it but turbo tax hasn't even mentioned payback of a mortgage, do you know how I need to show this?

Most people report it as ordinary foreign source income, so on the "other income" line of the tax return. Because of the collapse in Sterling after June, large numbers of US individuals who repaid or re-financed UK mortgages after the Brexit vote will need to recognise a decently chunky foreign mortgage gain.


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