Hi Louise and welcome to our site!
If I sold my UK property (which I have not lived in for any period of time in the last five years), would I be subject to Capital Gains Tax?
If you sell the property for more than you paid for it - you will have a gain. That gain will be added to your other taxable income - and your actual tax liability will be based on TOTAL income, filing status, deductions, etc.
You woudl not qualify to exclude the gain from taxable income because it was not your primary residence during last five years.
However - because you owned the property more than a year - the gain if any will be taxed at reduced long term capital gain rates - for most taxpayers not more than 15%.
What if I was to use the money made on the property to invest into a primary residence in the US?
That will not help you in any way... As long as the gain is realized - it will be recognized for income tax purposes regardless how proceeds are used.
What are Capital Gains Tax rates in the US?
Long term capital gain rates are
-- zero - if your income otherwise is taxed at 15% or less
-- 15% - if that income otherwise is taxed at 25% - 35%
-- 20% - if you are in 39.6% tax bracket.
My household income is $185,000 and I file a joint tax return as married. I expect to make approximately $220,000 on the property sale. Thanks Louise
Based on your information - your capital gain will be taxed at 15% rate.
I assume that $220,000 is the gain (not total proceeds)
I assume that you filing a joint tax return with yourt spouse, standard deduction, no other deductions or credits
with $185,000 gross income - your estimated federal income tax liability is $33,000
with additional $220,000 long term capital gains - your estimated federal income tax liability would be $81,000
that includes alternative minimum tax (AMT) - ~$7500
and Net Investment Income tax(NIIT) ~$5900
Let me know if any clarification needed.