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I am from India staying in US since Jun-2014 got Greencard in Jan-2018. I own property in India since 2009. I want to sell and bring money to US, How does US tax apply?

Also since the property sale is in India and there will be tax in India, will it be taxed in US also?
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3 Replies
pk
Level 15
Level 15

I am from India staying in US since Jun-2014 got Greencard in Jan-2018. I own property in India since 2009. I want to sell and bring money to US, How does US tax apply?

@vinay-kotamreddy , sale of assets in a foreign country  for a US citizen/Resident ( Green Card ) / Resident for tax purposes, is treated the same as if the property was in the USA.   If the property was income property  then there is allowable depreciation to be considered for  tax consideration  ( Capital gain treatment vs.  ordinary gain ) You tell TurboTax that you have asset disposal to report and it will fill out the forms for you.  Note that you will have to report the  basis in US$ at the time of acquisition  ( how did you acquire the property ? ), any improvements  during the period of holding  in US$ of the day and the sales proceeds ( Sales price less  sales expenses etc. ) in US$ of the day.  If the amount rests in any foreign bank then you also may come under  requirements of  FBAR  ( Treasury form 114 )  and  FATCA  ( IRS form 8938 ).

 

The transfer of the funds  is not a tax event .

 

Is there more help I can provide ?

 

Namaste ji

sugumarc
New Member

I am from India staying in US since Jun-2014 got Greencard in Jan-2018. I own property in India since 2009. I want to sell and bring money to US, How does US tax apply?

I am planing to sell my own property in India which i bought sometime around 2006 and have rented all along.  Now, we are planning to sell that, bring the money here to US$ and invest the same on my new home.  

 

In related to this, how does Tax work in India & US?  I am hearing that buyer will deduct 22% as TDS on the sale amount.   I am okay with that, but not sure whether do i need to  to pay anything more to India  or US from tax purpose

 

Also, i see that we can claim the TDS if we invest the amount in real estate or bonds.  if  i invest the amount in US real estate, am i eligible to claim that?

 

Appreciate your response on this...

 

 

pk
Level 15
Level 15

I am from India staying in US since Jun-2014 got Greencard in Jan-2018. I own property in India since 2009. I want to sell and bring money to US, How does US tax apply?

@sugumarc ,   from your post, while not explicitly stated, I am assuming that   (a) you and your family ( if you file jointly ) are US citizens/Resident ( Greencard ) / Resident for tax purposes;  (b) your property in India was acquired by  you / spouse  by purchase and not by gift or  inheritance, i.e. you have documentary evidence as to the price  you paid  in 2006 ( converted to US$ of the day );  (c) you have documentary evidence , & expenses thereof ,of all the improvements that you have made to the  income property over the years;   (d) that you have include/reported your rental income every year to the IRS and the State during this holding period .

If some or all of the above are not true, then please start a new  question and I will come back and answer to the best of  ability -- Namaste ji

 

With the above  out of the way---  (1) you tell TurboTax  ( I use the  Home & business version, downloaded/CD) , in the  business section that you have sold a rental / income property and TurboTax will do the needful  i.e. fill out the  forms  4797, schedule-D, Schedule-E etc. along with the 1040.   You will need the  following data points -- 1. Adjusted Basis  =   Acquisition Cost  PLUS Cost of all improvements  PLUS  Suspended LOSSES,  LESS Accumulated allowable depreciation  ( note here that for the years through 2017 you need to have used a life of 39.5 years , like commercial property while any started after that date , that distinction  for foreign property is not valid any more);  2. Sales Proceeds =   Gross Sales amount  LESS all sales related expenses including transfer tax etc.  TurboTax would then  compute  your  gain as the difference between  Sales Proceeds LESS Adjusted Basis.  Thereafter, it will compute  the tax applicable --- note that part of the gain that is attributable to allowable  depreciation ( i.e.  gains up to accumulated  depreciation  ) is  treated as  Ordinary  gain and taxed  at your marginal rate , the  rest / residual portion of the gain would be treated as  Capital Gain.

The  taxes paid  ( not the flat amount collected at source  )  is eligible for  foreign tax credit-- form 1666.

India uses an indexed  basis (i.e. the  acquisition cost is  adjusted for CPI / inflation ) while US does not.  Thus profit in India  may be much less  than that computed  per the US tax laws.

Any monies  from India that rest in a Bank account that you Own or have control over , may  come under  FBAR ( Treasury form 114 )  and/or FATCA ( IRS form 8939 ).  You may have to file one or both depending on the amount and  situation -- there is no tax impact but not filing when required to, may result in onerous penalties.

 

Does this answer  your query or do you need more help ?

 

Namaste ji

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