Do you wish to sell your home once you move overseas? Do you wish to know in-depth details related to selling your home while living overseas? You have come to the right place at USTAXFiling.in where you will get in-depth details related to selling your home while living overseas. Stay tuned at USTAXFiling and continue to read this blog till last to understand how you can sell your home while living overseas!
Many Americans retain their property in the United States when they move abroad. Few plan to rent it out for additional income. Others wish to keep their foothold in the United States.
Once you move abroad, you might be thinking of selling your old house. But, you should know how easy it is to do. What are the possible tax implications of selling your home while residing overseas? In this blog, let us discuss all the details related to Selling your home while living overseas!
Can You Sell Your Home from Abroad?
Yes, it is possible for you to sell your US house while residing in another country. Also, selling your home while staying in another country might be challenging and create complications for your expat tax return. Before you begin the process, it is always best to understand what to expect.
Tax Ramifications of Selling Your Home While Living Overseas
When you consider selling your house, you will have a capital loss or gain. If you sell your home for more than you original amount you paid for, you have a capital gain. If it sells for less than the amount you paid for it, you have a capital loss.
If you sell your home and receive a capital gain, you have to report it to the Internal Revenue Service. You might owe a capital gains tax on the increased value of your house.
This rule is applicable whether you live overseas or in the United States at the time of sale. When you sell your home while living overseas, you can use the Main Home Exclusion to shield your capital gains from taxation.
What Is the Main Home Exclusion?
This is an IRS (Internal Revenue Service) tax benefit that allows home owners to exclude all the capital gain on their home sale from taxation. Main Home Exclusion helps you exclude up to $250,000 of the capital gain from taxation.
The exclusion amount increases to $500,00 if you file as married filing jointly. Also, everyone is not eligible for this program.
Can You Claim the Main Home Exclusion as an American?
Yes, residing in another country doesn’t stop you from claiming the Main Home Exclusion. Also, there is an eligibility threshold that will prevent expats from excluding their capital gains.
To become eligible for the Main Home Exclusion, these are the following standards:
- You used the home as your main residence for a minimum of two years in the past five years
- You owned the home for a minimum of two years out of the past five
These two years should not coincide. In both scenarios, the two years should not be a continuous block of time. For instance, if you used a United States house as your main residence for a year, then moved overseas for three years, and then returned to your original house for another year, you are still eligible for the main residence requirement.
Based on how long ago you moved away from the US, these rules might disqualify you from claiming the Main Home Exclusion. Also, if you don’t become eligible, specific extenuating scenarios may help you to claim a part of the exclusion.
Exceptions of Main Home Exclusion
The Internal Revenue Service is lenient when making exceptions to the Main Home Exclusion’s two-year main residence needs. Let us consider examples.
Work-Related Move
You can claim a partial Main Home Exclusion if you moved overseas from your main residence as:
- You were unemployed previously, then took a job at least 50 miles away from your house
- You took a new job at least 50 miles away from your past job
Health-Related Move
You can claim a partial Main Home Exclusion if you moved overseas from your main residence as:
- Your health care professional recommends that you move because of a health issue
- You relocated to treat an injury or illness
- You relocated to care for an injured or ill family member
Unforeseeable Events
You can claim a partial Main Home Exclusion if you move overseas from your main residence as:
- There was a death in the house
- Your home was condemned
- Your home was destroyed
- You had a divorce with your spouse
- You are legally separated from your spouse
- You had triplets, twins or another multiple-birth
- Your house was situated in a dangerous area
- Your home was unsafe
- You had to move to adopt a kid
- You lost your job
- You cannot afford your living costs
How You Can Report US Property Sales As An American
You have to report the capital gain on your US property sale if the following is true:
- You received the 1099-S Form: Proceeds from the Transactions of Real Estate
- You cannot exclude the entire amount of capital gains on the sale of property from taxation
You should report the sale if you had no taxable capital gains if you received Form 1099-S. This form 1099-S is issued by the real estate agent who closed the sale.
If there is a need to report the sale, you must do so using Form 8949: Sales and Other Dispositions of Capital Assets. Once you complete this form 8949, you have to attach it to your yearly income tax return and file both together. In some scenarios, you have to report the sale on a state tax return for the state where the property is located.
Note
Also, you have to attach your Form 1040 income tax return, you should report the sale on Schedule D of Form 1040.
Need Assistance with Your Expat Taxes?
We hope through this blog, you understand the implications of the tax of selling your home while living overseas. If you still have doubts, we at USTAXFiling.in would be happy to share all the answers.
At USTAXFiling Expat Tax Services, we assist Expats living overseas file their expat taxes on time and accurately. Connect with USTAXFiling right away and we would be happy to assist you in any possible way. Our talented team of experts at USTAXFiling ensure to discuss all your queries and resolve them at the earliest!