How are Capital Gains taxed when earned before immigrating to the US?

You've asked a really good question about a somewhat complex situation. The good news is that the US tax code actually considers this exact scenario! When you become a US tax resident (getting your green card makes you a US person for tax purposes), you generally get what's called a "step-up in basis" to the fair market value of your foreign assets on the date you became a US resident. In your case, this means your new "basis" in the property would be $650,000 (the appraised value when you got your green card), not the $370,000 you originally paid for it. So when you sold it for $655,000, your taxable capital gain in the US would only be $5,000 ($655,000 - $650,000), not the entire $285,000. Make sure to document the property's value as of your US residency date. Having that appraisal is perfect - keep it with your tax records! You'll report this on Schedule D of your tax return, and you'll want to clearly note the step-up in basis when you file.

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I was initially skeptical about using an online service for my complex international tax situation, but after struggling with conflicting advice from two different accountants, I decided to try taxr.ai. I'm really glad I did! My situation was complicated - stock options from my foreign employer that vested over several years, plus rental property in my home country. The step-up basis calculations were driving me crazy. What impressed me was how detailed their analysis was. They broke down exactly which portion of my capital gains were taxable in the US, provided clear documentation I could attach to my return, and even explained the treaty provisions that applied to my specific case. The best part was when I did get a letter from the IRS (not even an audit, just a question), I had perfect documentation ready to go that resolved the issue immediately. Definitely worth checking out if you're dealing with international tax complications.

When I became a US resident last year, I had a nightmare trying to reach the IRS to get clarification on my foreign property sale. Called for weeks and couldn't get through. Finally found Claimyr (https://claimyr.com) which got me connected to an actual IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed what others here have said about the step-up basis, but also warned me about a couple of potential pitfalls. For example, if you owned the property through a foreign corporation or partnership, the rules can be different. Also, they walked me through how to properly document everything on my tax return to avoid triggering unnecessary flags. Totally worth it to get official confirmation directly from the IRS rather than hoping I was interpreting things correctly. They saved me from potentially overpaying by thousands.

I have to eat my words and apologize for my skepticism about Claimyr. After posting my doubtful comment, I decided to try it myself since I've been trying to reach the IRS for WEEKS about my foreign income questions. To my complete surprise, I was connected to an IRS representative in about 35 minutes. I almost fell out of my chair when my phone rang and it was actually the IRS on the line! The agent was able to confirm the step-up basis rules for my situation and also pointed me to some specific forms I needed for reporting my foreign rental income correctly. For anyone dealing with international tax situations like the original poster, getting direct confirmation from the IRS is incredibly valuable. The agent even emailed me some relevant tax publications that specifically addressed my situation. Sorry for doubting - this service is the real deal.

Just wanted to add another perspective: make sure you check if there's a tax treaty between the US and your former country. Some treaties have specific provisions about capital gains taxation that might affect your situation. Also, if your former country has already taxed you on the gain (some countries impose an "exit tax" when you leave), you might be eligible for a foreign tax credit in the US to avoid double taxation. The forms for this get complicated fast though.

Has anyone dealt with Form 8833? My accountant is saying I need to file this to claim treaty benefits for the step-up basis on property I sold after immigration. Is this really necessary?

This is exactly the kind of situation where having proper documentation from day one of your US residency is crucial. I went through something similar when I moved from the UK with both property and investment accounts. One thing I'd add to the excellent advice already given - make sure you also document any improvements or renovations you made to the property during your ownership, even before becoming a US resident. While you get the step-up basis to fair market value on your residency date, any additional improvements after that date can be added to your basis as well. Also, keep in mind that different states might have different rules for how they treat this situation, so if you're in a state with income tax, you'll want to check their specific requirements too. Some states don't automatically follow the federal step-up basis rules. The $5,000 gain you're looking at is definitely manageable tax-wise, especially compared to what it could have been! Just make sure you have all your documentation organized - the appraisal, the sale documents, and any records showing the timeline of your residency status change.