I am a US citizen, sold my US property in 2000, moved to the UK and transferred the proceeds to buy a UK property. I am coming back to the US in a few months, and would like to sell my UK property (I have sold my original UK property then bought another house) and transfer the money back to the US in order to buy a home. Am I liable for tax on the money from the sale of my UK house, that enters the US? It is my primary residence, and I do not have a US property.
Before any discussion of whether you owe tax on the sale of the UK home-----You mention that when you sold the home you owned in the US you "transferred the proceeds to buy a UK property." Did you receive a 1099S for the sale of that US home and enter it on your tax return back in 2000? The law that said you could avoid paying capital gains tax on the gain from selling a home changed in 1997---so in tax year 2000 you were subject to that tax law. What you did with the gain from the sale of your home in 2000 was irrelevant. Purchasing a home in the UK with the proceeds of the US home was irrelevant.
Since tax year 1998----
SALE OF HOUSE
If your gain was more than $250,000 filing Single, or more than $500,000 filing Married Filing Jointly the sale must be reported on your tax return. Whether you re-invested the gain in to another house is irrelevant. If you have a Form 1099-S go to Federal>Wages and Income>Less Common Income>Sale of Home (gain or loss)
If you owned and lived in the home as your primary residence for at least 2 of the last 5 years on the date of the sale, you do not have to report the home sale if the gain is less than $250K filing Single, or less than $500K filing Married Filing Jointly (and you both owned and lived in the home for at least 2 years).
- If you are using online TT, you need Premier or Self-Employed software to report the 1099-S
Your sale in 2000 was taxable under the rules in effect in 2000, meaning your capital gain was taxable, subject to a personal exclusion if you were selling your main home where you lived more than 2 years. What you did with the money after is irrelevant.
Similarly, the sale of property outside the US is reported on your US tax return the same as if it was property in the US. It doesn't matter where the money came from or what you do with the money later. The sale is taxed on its own. If this is your main home that you owned and lived in as your main home for at least 2 years, you can exclude the first $250,000 of capital gains (or $500,000 if married filing jointly) and the rest is taxed as long term capital gains. When you calculate the gain, report the purchase price in US$ using the conversion rate in effect on the date you purchased the property, and the selling price in US$ using the conversion rate in effect on the date of sale.
If the UK also taxes the sale, the US should allow you an offsetting credit or deduction, I believe.
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