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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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I am a permanent resident in the USA. I own 1 property which

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I am a permanent resident in the USA. I own 1 property which is a property in the UK which I am selling. I am using this money to buy a property in the USA. When I transfer the money to my USA account will I have to pay tax on this?

Lev :

Hi and welcome to our site!
You will NOT pay any taxes because the money are transferred to the US. The fact of transferring the money is not a taxable event.
However - because you are a resident alien in the US - you are required to report all your worldwide income regardless if proceeds are transferred to the US or you keep the money in your account abroad and regardless how funds are used.

Lev :

Thus - if you sell the property - and realize a gain on that sale transaction - that gain generally is taxable.
There are some situations when the gain may be excluded from taxable income. In particular - in the US you may exclude the gain from selling your primary home - up to $250k or single person - if the property was owned and used as your primary home at least two our of last five years.
The gain is calculated as (selling price) MINUS (adjusted basis),
where the basis is mainly your purchase price (assuming the property was purchased) adjusted by improvements and some other expenses.
Again - the fact of using proceeds to purchase another property in the US is irrelevant, but if that property was your primary residence - the gain might be excluded.

Lev :

For details about excluding the gain from selling your residence - see IRS publication 523 -
Same rules are for property in the US or abroad.
www.irs.gov/pub/irs-pdf/p523.pdf‎
In additional - please be aware - if you will have an account in UK - you might be subject of FBAR reporting.


If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, exceeding certain thresholds, the Bank Secrecy Act may require you to report the account yearly to the Internal Revenue Service by filing a Report of Foreign Bank and Financial Accounts (FBAR).



United States persons are required to file an FBAR if:
1.The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
2.The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.
There is no tax associated with FBAR reporting, but there are penalty for failure to report.


Lev :

Please be sure to ask for clarification if needed.
My goal is to provide EXCELLENT service and I will address all your tax related issues.

Customer:

what i need to know is whether I am liable to pay tax on the sale of my house in the UK?

Lev :

As we already mentioned above - because you are a resident alien in the US - you are required to report all your worldwide income regardless if proceeds are transferred to the US or you keep the money in your account abroad and regardless how funds are used. Thus - if you sell the property - and realize a gain on that sale transaction - that gain generally is taxable.
There are some situations when the gain may be excluded from taxable income. In particular - in the US you may exclude the gain from selling your primary home - up to $250k or single person - if the property was owned and used as your primary home at least two our of last five years.

Lev :

So - you do NOT pay tax on the sale - but if because of the sale - you realize gain - that gain might be taxable.

Customer:

Thanks but how does one calculate the gain...it's a gain but I've paid the mortgage against it already. Is it the selling price minus the original purchase price?

Lev :

That is correct - the gain is equal to (selling price) MINUS (adjusted basis),
where the basis is mainly your purchase price adjusted by improvements and some other expenses.

Lev and 3 other Tax Specialists are ready to help you
Customer: replied 3 years ago.

Thank you this is so helpful. Just one more thing..you say it's $250k threshold OR single person..does this mean if the property is owned jointly with my husband, we can each claim $250k exclusion?

Sorry for typo.

The maximum exclusion amount is $250,000 FOR a single person or $500,000 for a married couple filing a joint tax return.

However to be eligible for the maximum exclusion - the property should be owned and used as your primary home at least two our of last five years.

All details related to that exclusion may be found in IRS publication 523 page 10 -

http://www.irs.gov/pub/irs-pdf/p523.pdf

 

Customer: replied 3 years ago.

Thank you so much..


 

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