Hi,
I'm planning to buy a property in India for myself. And for that, I need to wire more than $100k and the money will be sent to my indian account.
I understand that the bank is expected to report this transaction to IRS. Do, I need to do anything in this regard? FBAR comes into picture only if I send this money to someone else as it will fall under gift category. But, in my case I will be sending it to my account itself. Should I be aware of any other obligations?
@sulz assuming you are US citizen/Resident,
1. Your transferring of US$100K will result in SAR being raised as a routine matter but it is not a tax event and nothing else is notable in this transaction. ( you probably told your US bank that is is to buy property in India )
2. The amount resting in an account (in India ) that you have control ( signature authority and/or own/operate) will require you to file FBAR form ( FINCEN for 114). This is because this will mean that your account value is equal to /more than US$ 10,000 at sometime during the tax year.
3. Depending on your filing status ( single/ married ) you may also come under FATCA and therefore report owning a bank account / financial assets in a foreign bank -- this is form 8938 along with your tax return. Again this is not a tax even , just reporting requirement.
4. Depending on the use of the property you may have to file a schedule-E with your return , if you rent out the property during a tax year.
5. If you received a gift from a foreign person/estate of more than US$100,000, you have to file a form 3520 -- not a tax even but reporting is required. If you gave a gift to someone , more than the free amount per year per person, then you have to report a gift return form (form 706 )-- not a tax event NOW but counts towards your life time tax free amount.
Is there more I can do for you ?
Namaste
pk
There are no tax implications to sending money to yourself. You will have to report ownership of any foreign accounts in your name if they contain more than $10,000 at any time during the year, but tax is not owed.
All property taxes that you pay on personal property, whether in the US or overseas, are deductible as itemized deductions on schedule A. (You are limited by the $10,000 cap on state and local taxes however.)
And as mentioned, if this property generates income, that income will be taxable in the US. If the income is also taxable overseas, you can take a deduction or credit on your US tax return for the overseas taxes.
Thank You @pk.
I'm an Indian citizen working in US. So will fall under resident status for tax filing based on the substantial presence test.
1) Yes. I will be reporting it to the bank or authorized electronic money institution like transferwise. Also, I believe SAR is the responsibility of the institution and no action is needed from my end. Am I right?
2) "sometime during the tax year" - Is there a definite period that one should be aware of or even if it resided on my account for a week (before I send it to the seller of property in India). Or would you recommend sending it to the seller directly rather than having it in my account to avoid filing FBAR. I'm asking as I'm not sure of the implications of FBAR.
3) I would literally be sending the money required to buy the property + minimum balance for the account. And the property is for my parents and so I will not be generating any income through it. Should this still require 8938 Filing?
As per https://www.irs.gov/businesses/comparison-of-form-8938-and-fbar-requirements,
- "Foreign real estate held directly" does not require 8938 filing.
- "Financial (deposit and custodial) accounts held at foreign financial institutions" is only needed if the "Total value of assets was more than $100,000 on the last day of the tax year, or more than $150,000 at any time during the year" which will not be my case for my category of filing.
Does that sound right?
4) Not applicable to me as my parents are gonna live there and I will not be earning any income out of it.
5) This is also not applicable for me as I'm sending to my own account from my earnings in US. So, neither I'm receiving gifts nor giving gifts to any one.
So, if my above understandings are correct, FBAR would be my only additional responsibility and that should be taken care separately by filing through BSA e-file system which I believe will not be part of turbo tax.
Kindly. validate my understanding and Thank You so much for your time.
Regards,
Sulz
Thank You @Opus 17 for your response.
This confirms my understanding as I have elaborated on the other reply.
which is
"FBAR would be my only additional responsibility and that should be taken care separately by filing through BSA e-file system which I believe will not be part of turbo tax."
Does that sound right?
Regards,
Sulz
@pk is definitely the expert on international tax matters, but I do know the FBAR is filed separately online and is not supported by TurboTax. The deadline is the same (April 15, 2021). TurboTax will ask if you owned any foreign accounts, because that question is required by the IRS, but when you answer yes, it will just remind you to separately file the FBAR.
gift return form (form 706 )
Just a small typo there. It's form 709, not 706.
@Carl @I’m confused. There is no gift involved here. I’m sending money from my US account to my Indian account for purchasing a property on my name.
@sulz you can ignore all the gift tax stuff in this thread. It just doesn't apply to you and appears to have just been unasked for additional information provided by @pk so as to "cover all the basis". But even though it doesn't apply to you (since it's not what you asked about) I felt it should at least be correct information in case it does help someone else reading this thread.
@sulz , My mistake -- the form for gift reporting is indeed 709 as pointed out by @Carl . Also the question of gift was ONLY because you had mentioned about "FBAR comes into picture ......as it will fall under gift category" and I was covering all the bases. Answers/comments/clarifications to your response earlier are :
(a) Anytime you do an international transfer US banks generally will raise a SAR ( when the amounts are around $10,000 or more ). You don;t have to do anything about this and generally does not mean anything.
(b) Citizens/Resident/Resident for tax purposes are required to report all bank accounts over which he/she has signature authority ( either owned/operated or just signature authority but no financial interest ) if the total of all accounts crosses the $10,000 mark ( at anytime 15,000 or 10,000 on the last day of the year ) -- FBAR , This is the FinCen form 114 , on-line reporting through BSA efiling. The test period for this is the tax year ( in the USA Calendar year). Sometimes this creates some arithmetic issues especially when amounts are moved between multiple accounts , none of which individually meet the filing requirement. This is not a tax event but just a filing requirement and because foreign banks also share with the FinCen details of US account holders, it is safer to file these reports even when one has not crossed the US$10,000 mark. The penalties for willful dis-regard of the requirement is onerous. So strongly suggest you file this online by the reporting date of 15th of April.
(c) The FATCA requirement is for specified financial assets and because your bank account may hold more than the minimum ( with a tax home in the USA the amount is between 50,000 and 150,000 depending on whether you file as single / married Filing Separate or Married Filing Joint ). See the detail for form 8938-->
https://www.irs.gov/instructions/i8938. Since the wired amount may stay in the account for a little while ( and satisfy the "at anytime during the year" clause, it is safe to recognize and report the account on mform 8938, even though you would have reported the same information on FBAR form. Note that the Specified Financial Assets include essentially all liquid and semi-liquid assets but not real-estate.
(d) agree with your comments for points (4) and (5).
BTW --- please keep records of your purchase using US$ of the day for future. I say this, because if someday you sell the prop. and are still in the USA, you will have to report the capital gain/loss. USA does not index your basis ( acquisition cost plus cost of improvements) -- India does-- and therefore the computation of gain is very different .
Hope this clarifies everything for you. If you need more help , please feel welcome to add to this thread and I will come back and help.
Namaste ji
pk