Hi
Thank you for the clarification.
I am a US citizen residing in Michigan.
Actual tax I paid in India is much greater than what I believe the tax liability in USA. While USA does not have indexation, my gain in dollar terms, as well as tax rate here, would ensure that my liability would be lower than what I have already paid in India. In effect, I believe my federal payments would be zero.
If I understand you correctly, Michigan does not recognize India-USA DTAA and hence my entire LTCG (calculated in dollar terms) on sale of the property will be taxed at the flat rate of 4.25% with no credit for taxes paid to Indian authorities.
Thank you.
