Today TaxMama hears from Colin in Maryland, who tells us, “I wish to sell my house in the UK as I live in the USA permanently now. What tax implications are there? It is my sole residence, with a value approx 240.000 pounds.”
Dear Colin,
From everything that I see, the tax code does not appear to distinguish between a personal residence here in the US or outside the country. Location of the home is not part of the definition of the personal residence.
You can read more about the rules here.
https://www.irs.gov/publications/p523/index.html
https://www.irs.gov/businesses/small/industries/article/0,,id=98921,00.html
So, since the tax code provides you with an exclusion of $250,000 for any gain you might have (or $500,000 if you’re married), if you originally paid more than 83,500 pounds for the house, it’s quite likely that you will pay no US taxes on the sale of this home. Of course, if you’re married filing jointly, the $500,000 exclusion may wipe out all the taxes.
You can use one of these currency converters to help you. https://www.oanda.com/convert/classic
https://coinmill.com/GBP_USD.html
However, you may face taxes in the UK. You’ll need to research that or consult with a Chartered Accountant there.
Incidentally, if you do pay taxes in the UK, it’s quite likely that you won’t be able to deduct those taxes on your US tax return.
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Why? Because you won’t be paying any US taxes on those profits.
A strategy you could try is to determine how much the UK taxes will be – and if you are better off reporting the sale of the house here and paying the low long-term capital gains rates on your US tax return.
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Then, reduce your taxes by the foreign taxes you pay in the UK.
If you want someone to help you with the US side of this planning, hire Roger B. Adams, EA to help you.
And remember, you can find answers to all kinds of questions about international taxes and other tax issues, free. Where? Where else? At TaxMama.com
- Ask TaxMama :: Where taxes are fun and answers are free
- www.TaxQuips.com :: The number ONE free tax podcast online
- IRS Publication 523 :: Selling Your Home
- IRS FAQs :: Sale of Residence – Real Estate Tax Tips
- OANDA.com :: Currency Converter
- CoinMill.com :: Another Currency Converter
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