Go Back  British Expats > Living & Moving Abroad > USA
Reload this Page >

Yet another uk house sale thread

Yet another uk house sale thread

Old May 12th 2012, 4:34 pm
  #1  
Just Joined
Thread Starter
 
Joined: Jan 2009
Posts: 19
Timberwolf0122 is an unknown quantity at this point
Default Yet another uk house sale thread

Hi,
I've been here on an L1B visa for 4 years, I just married a USC in July and now we are thinking of buying a house in Charlotte, nc.
I have a house in the uk i need to sell, I expect to make 35,000gbp off the sale how do I calculate the who/howmuch tax I'll have to pay the uk/us and can one tax be credited against another?? I've searched the forum and if anything I have more questions and doubts than when I started.

Thanks.
Timberwolf0122 is offline  
Old May 12th 2012, 6:20 pm
  #2  
Lost in BE Cyberspace
 
Michael's Avatar
 
Joined: Jun 2008
Location: San Francisco Bay Area
Posts: 10,678
Michael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond repute
Default Re: Yet another uk house sale thread

Originally Posted by Timberwolf0122 View Post
Hi,
I've been here on an L1B visa for 4 years, I just married a USC in July and now we are thinking of buying a house in Charlotte, nc.
I have a house in the uk i need to sell, I expect to make 35,000gbp off the sale how do I calculate the who/howmuch tax I'll have to pay the uk/us and can one tax be credited against another?? I've searched the forum and if anything I have more questions and doubts than when I started.

Thanks.
If you would have sold it 1 year ago, there wouldn't have been any US tax due if it was your primary residence for 2 of the previous 5 years ($250K exclusion for single and $500K for married filing jointly). Since you no longer qualify for that exclusion, the property is consider an investment property and US long term capital gains tax is a maximum of 15% unless Alternate Minimum Tax (AMT) kicks in.

If you pay tax in the UK on the sale, you should be able to offset US tax owed with tax credits from the sale.

AMT can kick in if you have a lot of deductions such as state income tax, home mortgage interest, property tax, etc. (normally more than about $60K for married filing jointly plus income that has preferential tax advantages (ex. capital gains)). Also a significant amount of capital gains alone could trigger but since AMT only reduces the amount of deductions and exemptions, normally it has little effect if you don't have many deductions. If deductions are very high, that can also trigger AMT. The most basic rule for AMT is that you must pay a minimum of 26% tax on your income after an exclusion is taken (about $35K-70K depending on filing status). Normally this doesn't affect moderate income families and doesn't affect higher income families if most of their income is earned income since their marginal tax bracket is above 26%.

Last edited by Michael; May 12th 2012 at 6:40 pm.
Michael is offline  
Old May 12th 2012, 8:50 pm
  #3  
Just Joined
Thread Starter
 
Joined: Jan 2009
Posts: 19
Timberwolf0122 is an unknown quantity at this point
Default Re: Yet another uk house sale thread

Thanks for the reply, between the two of us we pull in close to $150,000 so with hat that in mind should I budget About $14,000 in us cgt (25% of 56k)?

On a side note I am selling the house to aunt, so could she give me a cash gift for part of the sale? Being family and all.
Timberwolf0122 is offline  
Old May 12th 2012, 9:26 pm
  #4  
Lost in BE Cyberspace
 
Michael's Avatar
 
Joined: Jun 2008
Location: San Francisco Bay Area
Posts: 10,678
Michael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond repute
Default Re: Yet another uk house sale thread

Originally Posted by Timberwolf0122 View Post
Thanks for the reply, between the two of us we pull in close to $150,000 so with hat that in mind should I budget About $14,000 in us cgt (25% of 56k)?

On a side note I am selling the house to aunt, so could she give me a cash gift for part of the sale? Being family and all.
If you are using the standard deduction, you can get a good estimate of the taxes owed by using the following calculator. First enter your income and calculate the tax and record it. Then add the capital gains and calculate again. The difference should be approximately your capital gains tax.

http://www.dinkytown.net/java/Tax1040.html

I suppose you could do that although that is not 100% legal.
Michael is offline  
Old May 12th 2012, 10:27 pm
  #5  
Just Joined
Thread Starter
 
Joined: Jan 2009
Posts: 19
Timberwolf0122 is an unknown quantity at this point
Default Re: Yet another uk house sale thread

Ah well I'm all for loopholes but I don't want to do anything illegal.
Damn tax law, makes it difficult for an honest man to live the dream.
Timberwolf0122 is offline  
Old May 12th 2012, 10:45 pm
  #6  
Lost in BE Cyberspace
 
Michael's Avatar
 
Joined: Jun 2008
Location: San Francisco Bay Area
Posts: 10,678
Michael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond repute
Default Re: Yet another uk house sale thread

Originally Posted by Timberwolf0122 View Post
Ah well I'm all for loopholes but I don't want to do anything illegal.
Damn tax law, makes it difficult for an honest man to live the dream.
Did you do any enhancements to your home? Those are deductible (but not maintainance) from the selling price. When I sold my last home, I deducted about $40K for enhancements.
Michael is offline  
Old May 13th 2012, 12:58 am
  #7  
Just Joined
Thread Starter
 
Joined: Jan 2009
Posts: 19
Timberwolf0122 is an unknown quantity at this point
Default Re: Yet another uk house sale thread

I did spend 5000gbp on a new roof, and 300gbp fixing a leaky chimney.
Timberwolf0122 is offline  
Old May 13th 2012, 1:53 am
  #8  
JAJ
Retired
 
JAJ's Avatar
 
Joined: Apr 2004
Posts: 34,649
JAJ has a reputation beyond reputeJAJ has a reputation beyond reputeJAJ has a reputation beyond reputeJAJ has a reputation beyond reputeJAJ has a reputation beyond reputeJAJ has a reputation beyond reputeJAJ has a reputation beyond reputeJAJ has a reputation beyond reputeJAJ has a reputation beyond reputeJAJ has a reputation beyond reputeJAJ has a reputation beyond repute
Default Re: Yet another uk house sale thread

Originally Posted by Michael View Post
If you would have sold it 1 year ago, there wouldn't have been any US tax due if it was your primary residence for 2 of the previous 5 years ($250K exclusion for single and $500K for married filing jointly). Since you no longer qualify for that exclusion, the property is consider an investment property and US long term capital gains tax is a maximum of 15% unless Alternate Minimum Tax (AMT) kicks in.
The AMT tax rate is still 15% on long term capital gains, as far as I know, although capital gains can still affect exposure to AMT through phase out of the exemption.
JAJ is offline  
Old May 13th 2012, 1:57 am
  #9  
JAJ
Retired
 
JAJ's Avatar
 
Joined: Apr 2004
Posts: 34,649
JAJ has a reputation beyond reputeJAJ has a reputation beyond reputeJAJ has a reputation beyond reputeJAJ has a reputation beyond reputeJAJ has a reputation beyond reputeJAJ has a reputation beyond reputeJAJ has a reputation beyond reputeJAJ has a reputation beyond reputeJAJ has a reputation beyond reputeJAJ has a reputation beyond reputeJAJ has a reputation beyond repute
Default Re: Yet another uk house sale thread

Originally Posted by Timberwolf0122 View Post
Hi,
I've been here on an L1B visa for 4 years, I just married a USC in July and now we are thinking of buying a house in Charlotte, nc.
I have a house in the uk i need to sell, I expect to make 35,000gbp off the sale how do I calculate the who/howmuch tax I'll have to pay the uk/us and can one tax be credited against another??
You have to do two separate tax computations - one for the UK and one for the United States. If you pay tax in one country you might be able to offset against the other.

And you should seek tax advice on your USA tax calculation. In particular, you may have to convert both the purchase and sale prices into US dollars. This may increase your gain for USA purposes - or eliminate it.

Has your house been rented out? If yes, have you been paying USA tax on the rental income?

As an aside - if you got married last July, then why are you still on an L1-B, normally you should have filed AOS to permanent resident, unless your employer is getting you a green card ...

Last edited by JAJ; May 13th 2012 at 1:59 am.
JAJ is offline  
Old May 13th 2012, 2:08 am
  #10  
Lost in BE Cyberspace
 
Michael's Avatar
 
Joined: Jun 2008
Location: San Francisco Bay Area
Posts: 10,678
Michael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond repute
Default Re: Yet another uk house sale thread

Originally Posted by JAJ View Post
The AMT tax rate is still 15% on long term capital gains, as far as I know, although capital gains can still affect exposure to AMT through phase out of the exemption.
The AMT is on total income so therefore income that is tax preferred can affect the overall taxes paid since deductions are phased out. So you are right, it does not directly affect the capital gains rate otherwise Romney would have paid a very large tax bill instead of an effective tax rate of less than 15%. In the case of Romney, he lost all deductions except charitable donations (10% of his income) and a few other deductions that primarily benefit the rich.
Michael is offline  
Old May 13th 2012, 2:19 am
  #11  
Lost in BE Cyberspace
 
Michael's Avatar
 
Joined: Jun 2008
Location: San Francisco Bay Area
Posts: 10,678
Michael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond reputeMichael has a reputation beyond repute
Default Re: Yet another uk house sale thread

Originally Posted by Timberwolf0122 View Post
I did spend 5000gbp on a new roof, and 300gbp fixing a leaky chimney.
Not the leaky chimney since that is maintainance but a slim possibly for the roof if an upgrade was done (ex. tar paper to tile or possibly if a better quality roofing material was used). In other words, if I were to upgrade a deck to be larger or use redwood instead of the original pine, those are probably deductible. There are gray areas in the tax code as to what is an upgrade. Also maintainance is deductible if it is done in preparation for sale (usually work must be done less than 6 months prior to the sale).

If both of those were done when you were renting it out, they should have been deducted then since maintainance is normally deductible on rental properties.

Last edited by Michael; May 13th 2012 at 2:23 am.
Michael is offline  
Old May 13th 2012, 12:48 pm
  #12  
Just Joined
Thread Starter
 
Joined: Jan 2009
Posts: 19
Timberwolf0122 is an unknown quantity at this point
Default Re: Yet another uk house sale thread

The house has not been rented, I've just "kept the lights on" and let the odd family member ( my brother travels a lot around the world and place is nicely located then going from Portsmouth to heathrow).

I did put velux windows into the roof which made the attic much more useable, and my understanding of the us uk tax treaty is if I pay tax on the sale of an asset to the uk it can be offset against the us.

One other thing I did some more googling and the uscalculate the cg as the purchase price converted to usd minus the sale price converted to usd, is that right? If so then this might not be too bad as I bought it out from my ex in 2005/2006 and the exchange was at 1.8 then.

I'll admit I was a little peeved at this cgt thing as I wanted to use the money to buy someland and do a new construction but with capital gains it is going to make it difficult to reach 20% down payment on the construction loan (thank you subprime fiasco).
Timberwolf0122 is offline  
Old May 13th 2012, 1:43 pm
  #13  
Just Joined
Thread Starter
 
Joined: Jan 2009
Posts: 19
Timberwolf0122 is an unknown quantity at this point
Default Re: Yet another uk house sale thread

Oh and I'm midway though the who green card thing, I have my second biometric in a few weeks.
Timberwolf0122 is offline  
Old May 14th 2012, 4:57 pm
  #14  
Just Joined
 
Joined: Apr 2012
Location: Cumbria to Toledo, Ohio
Posts: 24
trirod is just really nicetrirod is just really nicetrirod is just really nicetrirod is just really nicetrirod is just really nicetrirod is just really nicetrirod is just really nicetrirod is just really nice
Default Re: Yet another uk house sale thread

Do you have a mortgage on the UK house?

Liabilities in foreign currencies are subject to tax in the US when that liability is paid off, so if the exchange rate has dropped since you bought the house you may have a capital gain on that.

Example - take out a mortgage of GBP 100,000 when GBP1=USD1.60. Pay mortgage off when GBP1=USD1.50. Your loan went from $160,000 to $150,000 without even making any payments on it so you have a gain of $10,000.

Aren't taxes fun?
trirod is offline  
Old May 14th 2012, 5:11 pm
  #15  
Just Joined
Thread Starter
 
Joined: Jan 2009
Posts: 19
Timberwolf0122 is an unknown quantity at this point
Default Re: Yet another uk house sale thread

You cannot be serious? Really? You'd think it would be on the selling price - remaining mortgage.

Why even take currency fluctuations into account? After all even if the effective debt has been reduced so has any money that might be realized from the sale.

[bangs head on table]

So just noticed October will be my 5th year in the US (Time flies) if I delay the sale till then would that mean that the UK would put me in the >5 years out the country no-longer eligible for UK CGT? Because that would be one less head ache!

Last edited by Timberwolf0122; May 14th 2012 at 5:51 pm. Reason: Extra detail
Timberwolf0122 is offline  

Contact Us - Archive - Advertising - Cookie Policy - Privacy Statement - Terms of Service - Do Not Sell My Personal Information -

Copyright © 2018 MH Sub I, LLC dba Internet Brands. All rights reserved. Use of this site indicates your consent to the Terms of Use.