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I would l like information on (1) the USA tax implications

for purchasing, renting and selling...
I would l like information on (1) the USA tax implications for purchasing, renting and selling a home in Nicaragua and (2) the USA tax implications for income if I work in Nicaragua.

Specifically in relation to inquiry #1:
1. What USA taxes are associated with rental income gained from a residential property purchased in Nicaragua?
2. What are the USA tax ramifications of selling a property purchased in Nicaragua. (We have a primary property in Oregon so this is a second property and not our primary residence).

Specifically in relation to inquiry #2:
1. What are the USA income tax implications for working in Nicaragua? Are the ramifications different based on residential status, which could be any of these scenarios: a). temporary residency vs. permanent residency and among those - retired residency vs. immigrant residency vs. resident renting property vs. worked based residency.

Thank you,
Tiffany
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Answered in 1 hour by:
9/1/2011
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,132
Experience: Taxes, Immigration, Labor Relations
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LEV :

Hi Tiffany and welcome to Just Answer!
1. What USA taxes are associated with rental income gained from a residential property purchased in Nicaragua?
You will report rental income the same way as if the rental property were in the US. Your net rental income after allowable deductions will be added to your other taxable income and your tax liability will be determined based on your total income, filing status, deductions, etc.
If the same income is taxed in the US and abroad - you may claim a credit for foreign taxes paid - thus effectively will eliminate double taxation.
2. What are the USA tax ramifications of selling a property purchased in Nicaragua? (We have a primary property in Oregon so this is a second property and not our primary residence).
If that is your personal property - you will report the sale transaction on the schedule D. Your capital gain = (selling price) - (basis - mainly purchase price plus improvements) - (selling expenses). If the property was owned more than a year - the gain will be long term capital gain taxable at reduced rate - not more than 15%.

Specifically in relation to inquiry #2:
1. What are the USA income tax implications for working in Nicaragua?
Assuming you are an US citizen or a resident of the US - all worldwide income should be reported on your US tax return. If you physically in a foreign country more than 330 days during any 12 month period - you might be eligible for foreign earned income exclusion.


As I mentioned above - if the same income is taxed in the US and abroad - you may claim a credit for foreign taxes paid.
Are the ramifications different based on residential status, which could be any of these scenarios: a). temporary residency vs. permanent residency and among those - retired residency vs. immigrant residency vs. resident renting property vs. worked based residency.
If you are temporary moved because of job assignment - less than a year - you might be eligible to deduct travel expenses. If you are moving permanently - no travel expenses are deducted.


If you will be a bona fide resident of a foreign country – you may exclude foreign earned income regardless of 330 days test.


If you will be neither US citizen nor a resident of the US – foreign income will not be reported on US tax return and will not be taxable.


Let me know if any details needed.

Customer:

Thank you. Very helpful. I will let you know if I have further questions.

LEV :

Please be aware that I provided very high level information.
If needed I will give you more details for any specific issue.

Customer:

Thank you. Very helpful. I will let you know if I have further questions.

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,132
Experience: Taxes, Immigration, Labor Relations
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