Wire Transfer from Philippines to USA - any tax liability?

[mj0707]

Good morning.

I have migrated here in the USA back in 2015 and now a naturalized citizen. I left a property in the Philippines that has been unattended so I decided to sell. This is only roughly 23K. I have already wired 10k to my US account but now hesitant to wire the rest with all the articles that I have read about getting reported to IRS.

• Is it safe and legal to wire the rest of my money within the same month? Maximum wire allowed by my bank is 10K so this will be two more transactions. Will this be flagged?
• Do I need to report any of this and do I have to pay taxes here in the US? I already paid capital gains tax in the Philippines.

My bank in the Philippines (under my name) had me fill up a form stating the purpose of the remittance and what is the source. I have stated that it's for paying bills here and was sourced from the sale of a property.

Any suggestions and clarifications please? Thank you.

[tagteam]

Please check back here later. I will page Champ @pk.

[Opus 17]

I see three issues here.

1. If you are a US person (citizen, green card or resident alien) then you are subject to US tax law.  That includes the fact that you must file a US tax return that reports and pays US tax on all your world-wide income.  In this case, that means you owe capital gains tax on the sale of your property, if you had a gain (sold it for more than. your cost basis).  Not the proceeds, but any gain. 

https://www.irs.gov/taxtopics/tc409

This is true once you sell the property, no matter where the money is being kept.  If you sold the property in 2024, you report the gain on your 2024 tax return, no matter where the money is located.

Very briefly, you would report the cost of the property in the USD equivalent for the day, month or year you bought it, report the proceeds in USD as of the day you sold it, and pay capital gains tax on any gain (increase) in the value.  If you had a loss, the loss is tax-deductible if this was investment property, but the loss is not deductible if this was personal property.

If you also owe tax in your home country on the same income, you can claim a deduction or credit on your US tax return to reduce the effect of double-taxation

There are sometimes exceptions to these general rules if the US has a tax treaty with the other country that discusses the subject.  Another expert will have to tell us whether there is a tax treaty with The Philippines. 

2. Moving your own money between banks is never, by itself, a taxable event.  If you move more than $10,000, the banks are required to make a report, but this is routine, and does not by itself create the assumption that money is taxable.  However, if you intentionally structure the transfers to avoid this reporting requirement (such as making 3 transfers of $8000 instead of one transfer of $23,000) that can sometimes create a financial crime even if the money is perfectly legal.  Don't worry about the transfer, if you want your money in your US account, go ahead and move it there.

3. If you own or control a foreign bank account that has more than $10,000 US equivalent funds at any time in the tax year, you must file a disclosure called and FBAR report.  This is due the same time as your tax return (April 15), but is not part of Turbotax.  You do it separately online.  No tax is owed, it's just a report, but there can be a fine if you don't file it.  So for 2024, you will need to report the foreign account which held the sales proceeds even if it was temporary.  (But only if the money was in an account you controlled.  If the money is in your attorney's escrow account and is being wired to your personal account in the US, then you don't control a foreign bank account because it is your attorney's account.)

https://www.irs.gov/businesses/small-businesses-self-employed/report-of-foreign-bank-and-financial-a...

[mj0707]

Thanks for the explanation and the links.

1. The property was a house that I have been paying for monthly since 2006 until early this year. So all of those expenses plus downpayment must be considered as total cost of property, is that right? In which case, I sold the property at a loss because it has been unattended and was just additional expense for me.

2. I would love to wire the money here in one go but the bank has restricted the maximum amount to 10K per transaction. So, I hope they do not see this as intentional structuring. 

3. Thank you, this is already in my list of things to do. 

[Opus 17]

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@mj0707 wrote:

Thanks for the explanation and the links.

1. The property was a house that I have been paying for monthly since 2006 until early this year. So all of those expenses plus downpayment must be considered as total cost of property, is that right? In which case, I sold the property at a loss because it has been unattended and was just additional expense for me.

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No.  The cost is whatever the selling price/purchase price was.  I don't know if home ownership is different in the Philippines.  In the US, suppose you buy a house for $100,000.  You put down 20% ($20,000) and you pay a mortgage of maybe $430 per month for 30 years, which includes principle and interest.  That is money you borrowed, and promised to pay back.  The purchase price of the house is not $20,000 plus $430 per month,, the purchase price is $100,000.   Interest you pay to borrow the money is not counted as part of the cost for the house, only what it would have cost if you had paid cash.

Then suppose you sell for $120,000, but you only receive $40,000 because you have to pay off the mortgage.  The selling price minus the purchase price is $20,000, that's your capital gain.  It has almost nothing to do with the actual cash proceeds.

Or suppose you bought for $100,000 with $20,000 downpayment.  You borrow another $30,000 as a home equity loan.  You sell the house for $120,000.  You still have a capital gain of $20,000 that you must pay tax on, even though you got no cash at the closing and still owe more to the bank.  (Remember you did get the extra $30,000 tax-free at the time because of the promise to pay it back.  Your gain is still $20,000.

If you bought for a downpayment and a fixed price per month, there should have been an overall contract price, or a price can be calculated based on the payment and the number of months you were supposed to pay. 

[mj0707]

Thank you. That's pretty clear to me now. Appreciate you explaining everything. 🙂

[pk · Accepted solution]

@mj0707 , appreciating  my colleague @tagteam ,excellent answer, just would like to reiterate  a few points ( @Opus 17   had ) already mentioned :

(a) the limitation placed on US$ outflow  is per Philippine  treasury requirement -- has nothing to do with the US.

(b)  Assuming that this house that you sold was your second home ( i.e. not income property ),  the interest expenses  ( mortgage interest  ) may have been eligible  for deduction  if you were using itemized deduction.  It is probably too late to get any tax benefits from this  ( depending  on actual facts and circumstances).

(c)  If you have  paid any taxes  on the gain from the sale of the house per  Philippines  tax laws,  this foreign tax may be eligible  for foreign tax credit ( or deduction if you use itemized deduction).  Noten that since the sale was transacted / completed during 2024, this gain / loss need to be recognized  ONLY on your 2024 return  ( filed  in 2025 )..

(d) You have to compute the  gain/loss  under US tax laws for 2025 and it may be different  from that  under Philippines tax laws.  Turbo Tax  will do the work for you when you tell it that you have sold  an asset -- form 8939 and Schedule-D.

(e) You mentioned you have had a  bank account in Philippines.  Note that this comes under  FBAR  ( form 114 at Fincen.gov -- only on-line filing ) and possibly FATCA  ( form 8938 along with your  return ) regulations.  Hopefully you have  followed  these rules  for the past years ( if you met the  filing r thresholds ).

Is there more one of us can do for you -- now or in  2025 ?

[mj0707]

Thank you. Just one more question.  Since I bought the property in 2006 and sold in 2024, should I take into account the exchange rate of the dollar to peso when calculating the capital gains? 

[pk]

@mj0707  for US purposes --yes.  Generally you can use   ( as long you are consistent )  any source/type  ( Annual average, quarterly average or monthly average or dollar of the day etc. ).  IRS , US Treasury, WSJ , Yahoo finance etc. all have published historical rates available.

[mj0707]

Thank you. Appreciate all your responses and help. This is a great community!