You must report the sale of your home just like everyone else, just as you would if it were situated in the U.S. That's because the United States taxes its citizens on their worldwide income.
If the real estate was your principal residence and you lived in and owned the house for at least 24 out of the last 60 months ending on the date of the sale, you can exclude $250,000 of capital gains from taxation. This increases to $500,000 in capital gains if you're married and you and your spouse file a joint return.
The sale will need to reported (converted into US dollars) on your tax return as the sale of a capital asset.
You won’t pay taxes on the first $250,000 (also known as a gain) you make from the sale of your home. If you file jointly, you won’t pay taxes on the first $500,000.
That income is free and clear as long as:
- You owned the home
- It was your main home for two years or more within the five years leading up to the sale
- You waited at least two years between selling your primary home and excluding your first $250,000 or $500,000 from taxes. In other words, you may buy and sell as many primary homes as you'd like, but you'll only get this tax benefit every two years.
If you do have a gain on the sale, you may utilize foreign tax credit to help offset any double taxation.
