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levr
levr, Tax Advisor
Category: Capital Gains and Losses
Satisfied Customers: 29580
Experience:  Working for a large tax preparation service
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I am a UK citizen and a US Card holder. I was relocated to

Customer Question

Hi,
I am a UK citizen and a US Green Card holder. I was relocated to the US by a previous employer in June 2011 and I have not lived in the UK since then.
I own a property in the UK, which was my primary residence before being relocated to the US. I do not own any property anywhere else in the world and I rent in the US.
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?
What if I was to use the money made on the property to invest into a primary residence in the US?
What are Capital Gains Tax rates in the US? 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
Submitted: 1 year ago.
Category: Capital Gains and Losses
Expert:  levr replied 1 year ago.

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?

A.
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?
A.
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

A.

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.

Customer: replied 1 year ago.
Thanks Lev. The property is only in my name as my husband has no ownership. Would I be able to reduce the capital gains tax paid if I filed my tax return separately, with an income of $105k?
Expert:  levr replied 1 year ago.

Generally - by filing separate tax returns - you woudl not pay less taxes - and while to be precised - we need to prepare your tax returns both ways and compare - I woudl not expect any benefits.

If you are using any tax preparation software - there might be an option to compare MFJ vs MFS without actual preparation of separate returns.
Please be aware if you pay UK taxes ion the same income - you would be able to claim a foreign tax credit - thus effectively will avoid double taxation of the same income.

Expert:  levr replied 1 year ago.

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