JAJ

As far as I know, that is correct. It's not capital gains so is still a form of ordinary income, however a special set of tax rates applies. I haven't checked to see if net investment income tax (if applicable) applies to depreciation recapture. I have edited the above post for clarity.

Michael

In my opinion, it would be unfair to tax depreciation recapture as normal income. If that were the case and you depreciated $10,000 per year at a 25% top marginal tax bracket for 10 years and then recaptured $100,000 after a sale, your top marginal tax bracket may possibly be 33% because of all the extra income.

Also if a person's primary business was investing in a large number of properties and selling many each year, they would be donating to congressmen to make sure that law was changed since they would likely be paying 39.6% on the recapture.

toalorama

I have a Tax adviser here, but I am not tax astute, and when he talks it tends to go in one ear and out the other. So I wanted to check my facts in slow time before I speak with him on such an important matter. The company I work for is sponsoring me for a green card. Yep it is a risk doing this on an H1B but I am relatively happy. If the worst happened I think I could get another company to sponsor me. Thanks for the concern tho.

Cook_County

Hopefully you elected to file as a full year resident in the arrival year and have shed loads of excess foreign tax credits carrying forward to use against the tax on the gain?

JAJ

Except that most people don't do that and even if they did, it's not clear how that could generate these "excess foreign tax credits" you speak of. But there's always scope for learning.

And if the property is sold within 3 years it's likely not going to be taxable anyway, except possibly for depreciation recapture.

And if it is taxable, then they'll just have to pay the tax.

Michael

Also foreign earned income tax credits can't be used to offset taxes owed for capital gains.