If I live in the US and sell a second home in a foreign country, 1) what portion, if any, of the sale do I have to claim as income, and 2) do I have to pay any additional tax (capital gains?) on the sale of the property?

If I live in the US and SELL a second home that is in a foreign country, 1) what portion, if any, of the sale do I have to claim as income, and 2) do I have to pay any additional tax (capital gains?) on the sale of the property?

Thanks.

Answer

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Hi dixonj8868,

1) what portion, if any, of the sale do I have to claim as income?

If you are a U.S. citizen or resident alien, you must report income from all sources within and outside of the U.S. You are taxed on your worldwide income.

http://www.irs.gov/Businesses/Income-from-Abroad-is-Taxable

2) do I have to pay any additional tax (capital gains?) on the sale of the property?

You will pay the same capital gains tax on the sale of the property as if the property was located in the United States.

Even though you must report the gain on the sale of your foreign property, you may be able to claim a Foreign Tax Credit to minimize your tax bill.

If you paid or accrued foreign taxes to a foreign country on foreign source income and are subject to U.S. tax on the same income, you may be able to take either a credit or an itemized deduction for those taxes.

Taken as a deduction, foreign income taxes reduce your U.S. taxable income.

Taken as a credit, foreign income taxes reduce your U.S. tax liability. In most cases, it is to your advantage to take foreign income taxes as a tax credit.

http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Tax-Credit

I hope this resolves your question. If you need further help with this issue, please respond to this post.

Thank you for choosing TurboTax!


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TurboTaxMartinW , CPA, M.S. Taxation
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