Selling a property in China

[hoiyam]

My aunt is a US citizen and she is considering selling her property in China in 2025. She purchased the house 10 years ago.

She doesn’t live in the property for 2 of the last 5 years. 
If she sold the house, how would she file the tax return for 2025?

[Vanessa A · Accepted solution]

She would treat it like the sale of a property in the US and report it as the sale of investment.  This will be subject to capital gains taxes which will generally result in lower taxes than if it was taxed at your ordinary income tax rate. 

If she pays taxes on the sale to China, she would also then be able to take a foreign tax credit to offset to the taxes paid to that country. 

You would enter the sale of the land by clicking the following:

1. Federal
2. Income
3. Show More next to Investment Income
4. Start next to Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B) 
5. Select Other
6. Continue through and select second home for the type of investment
7. Answer how you obtained it
8. You will need to enter the selling price, dates and the cost basis   

Note, your navigation sequence may be slightly different.  You can also use the Jump to feature by entering investment sale in the search bar at the top of the screen. 

[hoiyam]

Does she need to pay the net investment income tax? Can she get tax deduction on the mortgage interest?

[ThomasM125]

A single individual would have to have modified adjusted gross income over $200,000 in 2024 to be subject to the net investment income tax. She can deduct mortgage interest on up to two houses not rented out or used for business as an itemized deduction. 

[hoiyam]

China has a restrictive currency control and she may not be able to move the money to the US. How does she pay the capital gain tax in this case?

[AmyC]

If you owe taxes and can't afford to pay, you can set up a payment plan with the IRS. See Apply online for a payment plan.