# Capital Gains Tax In US - Property Sale In UK



## shafanboot (Feb 4, 2014)

Details:
- Green Card Holder
- Have lived the US 3 years
- Bought a flat in the UK 4 years ago
- Has been rented out for the past 4 years
- Plan to sell the flat for a gain of $50,000

In the UK: I will not pay capital gains tax - 6 year rule

In the US: I cannot get the maximum exclusion, as I do not pass the 'used' test, however I believe I am eligible for the exception, based on the change of jobs.

Please can someone advise me if I will need to pay tax in the US on my $50k gain, or will this exclusion cover me?

Thanks


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## BBCWatcher (Dec 28, 2012)

The rules are detailed in IRS Publication 523. Let's take a look....

You meet the ownership test (owned the home for at least 2 out of the past 5 years), but you don't meet the use test (lived in the home for at least 2 out of the past 5 years). So you're then referring to the Reduced Maximum Exclusion provision.

And I'd say yes, but read the language very carefully.

A couple more things to note:

1. That rental income is income. If that income wasn't reported on your U.S. tax returns (whether U.S. tax was owed or not), that's a problem that must be corrected.

2. Be careful when calculating the gain on the home sale. The gain is net of costs, and a lot of people overestimate the gain. Read the instructions on how to calculate the gain very carefully.

3. The Reduced Maximum Exclusion means your exclusion will be something less than $250,000. That shouldn't be a problem with your relatively modest gain, but you have to run the calculation.


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