We have sold a second home overseas and now want to bring the money back to the US. Is the money received for the sale taxable?

[DS30]

It depends. Yes, if you are a US citizen or resident alien (No if you are a nonresident alien). According to the IRS, a US citizen or resident alien is required to report all worldwide income (in USD) on your federal income tax return

If you already recognized the gain on this sale on a prior year's income tax return, just transferring the money to the USA will not require any reporting on your US income tax return (except for possibly Form 8938). You may also need to file an FBAR (see below).

However, if you did not recognize the gain on the sale of this foreign home already, you would only have to recognize any capital gain on the sale for US income tax purposes so only that portion of the money received that represents the gain (net sales proceeds less cost basis) would be taxable on your US income tax return (the IRS does not allow the recognition of a loss on the sale of a second home that was a personal use property).

Click this link for further information about reporting the sale of a capital asset

Additionally, you would be able to take a foreign tax credit (passive) for any foreign taxes that you paid related to the gain on the sale of the foreign property. see this link Claim Foreign Tax Credit

The Internal Revenue Service has no official exchange rate. In general, use the exchange rate prevailing (i.e., the spot rate) when you receive the property, made any capital improvements and sold the property. Please refer to the following IRS links for more information about Foreign Currency and Currency Exchange Rates and Yearly Average Currency Exchange Rates 

To enter this transaction in TurboTax, log into your tax return  (for TurboTax Online sign-in, click Here ) and click on "Take me to my return") and type "investment income (gains and losses)" in the search bar then select "jump to investment income (gains and losses)". TurboTax will guide you in entering this information (see step 6 below) 

Alternatively, to enter this sale of a second home in TurboTax Online or Desktop, please follow these steps:

1. Once you are in your tax return, click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
2. Next click on “Wages & Income” ("Personal Income" in TurboTax Home & Business)
3. Next click on “I’ll choose what I work on” (jump to full list)
4. Scroll down the screen until to come to the section “Investment Income”
5. Choose “Stocks, Mutual Funds, Bonds, Other” and select “start’ (or “update” is you have already worked on this section)
6. The first screen will ask if you sold any investments during the current tax year (This includes any sale of real property held as an investment property so answer “yes” to this question)
7. Since you did not receive a 1099-B, answer “no” to the 1099-B question
8. Choose type of investment you sold - select Second Home
9. Some basic information:
1. Description –  Usually the address of the property sold
2. Sales Proceeds – Net proceeds from the sale  (select box to input selling expenses not reported on 1099-S)
3. Date Sold – Date you sold the property
10. Tell us how you acquired the property - purchased
11. Any business or rental use? - select personal use only (please note that capital losses are not allowed on personal use property) If you make another selection, you may need to report this sale under sale of business
12. Some Basis information
1. Date Acquired
2. Original cost basis
3. Cost of improvements.

Please note : If you have foreign bank accounts, you may be required to file a Report of Foreign Bank and Financial Accounts (FBAR) if are a US citizen or resident and:

1. you 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 reported.

To be directed to the US Treasury Government Website to prepare a Report of Foreign Bank and Financial Accounts, click FBAR (TurboTax does not support this form)

[XYS]

According to the procedures provided, Turbo Tax does not reflect that it is "foreign income". 

[KarenJ2]

If you paid foreign tax on this income, you need to input this information in the foreign tax credit section of TurboTax:

In the search bar at the top of the screen, enter foreign tax credit and click the jump to link.

Go through the first few screens about interest and dividends

When you get to the Income Type screen, choose passive income

Then enter the Country and continue through the screens

Filing form 1116