# USC/ILR selling property in the USA - Tax question.



## Nivie (Apr 22, 2021)

HI everyone.

Recent turn of events meant my USC/ILR partner needed to sell her US house pretty quickly and did not have time to plan ahead for tax purposes.

Purchased it in 2011 and lived in until 2016 (5 years). Moved to the UK mid 2016 and rented out during this period (5 years). Now sold (2021). Capital gains between purchase price and selling is about £114k / $151k

Know this needs to be reported to both HMRC and IRS but who has primary taxation, US or UK?

Read somewhere that UK property sales need to be reported to HMRC within 30 days of sale, but does this include foreign sales by UK resident or can we wait until annual self assessment?

What percentage of tax should we expect to pay on the capital gains so we can plan on holding savings back?

We will be reinvesting back into UK property. 

Thanks


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## Moulard (Feb 3, 2017)

Nivie said:


> Know this needs to be reported to both HMRC and IRS but who has primary taxation, US or UK?


Real Property located in the United States will be considered US Sourced income and the US will have primary right to tax it.

The UK will reduce the double taxation that will result according to the terms of the tax treaty. I am not familiar with the US-UK treaty but is likely to allow you a credit of some sort for US taxes paid. 

The US State the property is located in may also tax the gain on the sale - so don't forget any potential State tax liabilities.

As US States are not party to the Tax treaty, so you would have to rely on UK domestic rules to determine if you can claim a tax credit, offset or other deduction for US State taxes paid.


Depending on your taxable income as a whole, US Federal CGT will be either 15% or 20%. 

But, given the property changed to rental use after having been your home you will also need to factor in the fair market value of the property at the time it changed.

Dont forget that in working out the taxable gain you will also need to consider any adjustment to the basis of the original cost of the home (improvements and/or depreciation) since it was purchased.

Take a look at IRS Pub 544






Publication 544 (2021), Sales and Other Dispositions of Assets | Internal Revenue Service







www.irs.gov


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## Nivie (Apr 22, 2021)

Moulard said:


> Real Property located in the United States will be considered US Sourced income and the US will have primary right to tax it.
> 
> The UK will reduce the double taxation that will result according to the terms of the tax treaty. I am not familiar with the US-UK treaty but is likely to allow you a credit of some sort for US taxes paid.
> 
> ...


Thanks for the reply. Rather than filing our taxes on software, we may need to hire a professional for this year to make sure we get it right.


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