annisca

I'm considering selling my UK property. I've been out of the UK for over 5 years so I won't pay CGT in the UK upon the sale of my flat, as far as I know. However, I've heard two different things about capital gains tax in the US. Do I pay it on the total gain since I bought it ('98), or will I owe taxes just on the gains my flat has been subject to since I moved to the USA (04')?

Thanks!

Yorkieabroad

Check out previous discussions on exemptions based on whether it was your primary residence, how long you'd lived in it in the last 5 years etc - I'm not up to speed on that as it hasn't affected my sales. However, if you're liable to US CGT you will pay basis the gain since you bought it, not since you moved here. This is one of the things that really, really bugs me, although I know I should just accept it and let it go!

annisca

Thanks! Yep, I won't benefit from any exemptions because I haven't lived in my UK flat for 2 of the last 5 years. So I'll be responsible for US CGT in full - I was v pleased when someone told me that it's charged as a % of the value of the gain since I moved here vs when I bought it, but this doesn't seem to be true. I'll have to take it on the chin, but that's extremely annoying and strikes me as wrong, actually. Thanks for your advice!

chopper40

Yep, to confirm, its your purchase price, not valuation on date moving to USA.
I bought my flat 10 years ago and its doubled in price. Why would I want to pay CGT to IRS on that?? I have a year to figure out what I should do.
Then I think you have to pay tax on any "gains" made by exchange rate differences.

I currently rent out my UK flat. I thought it was decent of IRS to allow a tax deduction (based on value of purchase price). Then i found out that when I sell it, I'll also have income tax on the total amount I have deducted on my tax... by my reckoning thats not a deduction, thats just a deferral of tax???

The price of that Green Card is hefty indeed.

BritishGuy36

Wrong way around.

It's exactly because you haven't lived in it for years that you will be liable for CGT in the UK.

Yorkieabroad

There was a thread on this recently - I have been out of the UK for 16 years, but had a brief 6 month stint back there in 2005 which reset the clock. I'm now 5 complete tax years out so I asked my UK tax guy to confirm with HMRC that I was not liable to CGT. Despite the problems they are having at the moment the advisor has had written confirmation from them that I wont be liable for UK CGT on any future sales due to the length of time overseas. I am making sure that letter does not disappear in case someone down the line decides thats not the case......

Giantaxe

If you claim for depreciation on your taxes and the property hasn't depreciated in value when you come to sell it, why wouldn't that depreciation be recaptured?

chopper40

Giantaxe
What you say makes perfect sense. Why do they allow people to depreciate it in the first place? if it's possible, I wonder if its better not to take the depreciation??

Giantaxe

Property doesn't always go up in value!

I don't think you're forced to depreciate, but in the event of an eventual profit on sale, you are essentially getting the benefit of a deduction in today's dollars and paying it back in tomorrow's.

annisca

BritishGuy, the UK CGT thing I got from Deloitte when I was still an expat here (company paid for advice), so I'm pretty sure I'm correct on the fact that I won't have to pay CGT in the UK if I haven't lived there for more than 5 years. I certainly hope I am.........

dfjordan

If you check out the HRMC webpage under " capital gains for non residents" you´ll see it says that if you left the UK after 17.3.98, and are not resident and not ordinarily resident and at least 5 full tax years have passed between leaving and the year of return, then you will not be liable to capital gains at all.

BritishGuy36

Huh, fair enough then.

But all the discussion when I was moving here a couple of years ago was that if a property was not your primary residence for three of the last five years, you were liable for CGT.