How to handle Capital Gains earned before US immigration?

So I'm dealing with a unique situation and wondering if anyone has experience with this. I purchased a property in my home country for $340,000 about 5 years ago. When I immigrated to the US last month (finally got my green card!), the property was worth approximately $650,000 according to a recent appraisal. Due to some unexpected financial needs, I had to sell the property just a few weeks after becoming a US resident. The sale went through for around $655,000. My question is: Do I have to pay US capital gains tax on the entire $315,000 gain? Most of that appreciation happened while I was still living in my home country, so it feels unfair to be taxed on gains that occurred before I was even a US person. Is there some kind of "stepped up basis" or special provision for immigrants? Or does the IRS just tax the entire gain regardless of when and where it accrued? Any insights would be greatly appreciated!

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28 comments

Chloe Zhang

•8M

You're dealing with what's called a "step-up in basis" situation for immigrants. Good news - the US tax code actually accounts for this exact scenario! When you become a US tax resident (either through green card or substantial presence test), you get to use the fair market value of your foreign assets ON THE DATE you became a US resident as your new basis. This is sometimes called a "step-up in basis" for immigrants. In your case, since the property was worth $650,000 when you became a US resident, and you sold it for $655,000, you would only be taxed on the $5,000 gain that occurred while you were a US person - not the entire $315,000. You'll want to make sure you have documentation of the property's value at the time you became a US resident. An official appraisal from around your immigration date would be ideal. You'll report this on Schedule D and Form 8949 when you file your taxes.

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Chloe Zhang

•8M

For IRS purposes, it's generally best to have documents translated into English. The IRS wants to be able to understand all documentation you're providing. A certified translation would be ideal, though not always strictly required. As for the appraisal itself, what you want is documentation that clearly shows the fair market value on or very near your US residency start date. If your appraisal was done shortly before or after you became a resident, that should work fine. Just make sure it includes the property details, valuation amount, date of valuation, and the professional credentials of whoever performed the appraisal.

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Brandon Parker

•8M

I went through almost the exact same situation last year and found that using taxr.ai at https://taxr.ai really helped me figure out how to handle my pre-immigration capital gains. I had property in Europe that had appreciated about 70% before I moved to the US, and was super confused about how to report it when I sold it a few months after getting here. I uploaded my foreign property documents and tax situation, and their system analyzed everything and showed me exactly how to report the step-up basis correctly. They even gave me specific guidance on what documentation I needed to keep in case of audit. Seriously made the whole process so much clearer.

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Brandon Parker

•8M

Their analysis was surprisingly thorough - I didn't need another tax professional. They basically explained that I needed to establish the fair market value on my residency date and only pay tax on gains after that point. They also gave me a specific explanation of how to fill out Form 8949 with the adjusted basis. They don't handle the actual translation of documents, but they did provide clear guidance on what needed to be translated. They recommended I get certified translations of the most critical documents (the purchase contract and the appraisal). For some of the less critical supporting documents, they said unofficial translations might be sufficient as long as I kept the originals.

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Jace Caspullo

•8M

Just wanted to follow up - I tried taxr.ai and it was incredibly helpful! I was literally stressing for weeks about my foreign property sale and potential tax implications. The system guided me through establishing my step-up basis and even helped me understand which specific tax forms I needed to file. What I found most useful was their explanation of how to properly document everything. They pointed out that I needed to be very explicit about the step-up basis when filing Form 8949, and suggested I attach a statement explaining the basis adjustment due to immigration status. This wasn't something I would have known to do on my own, and it potentially saved me from having my return flagged for review. Definitely worth checking out if you're dealing with international tax situations like this!

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Melody Miles

•8M

If you end up getting any pushback from the IRS or need to provide additional documentation later, I highly recommend Claimyr at https://claimyr.com to actually get through to an IRS agent. I was in a similar situation with foreign property and needed to talk to someone at the IRS to confirm my filing was correct, but it was impossible to get through on the regular phone line. Claimyr got me connected to an IRS agent in about 20 minutes when I had been trying for weeks. You can see how it works at https://youtu.be/_kiP6q8DX5c - basically they navigate the phone tree for you and call you when an agent is on the line. I was super skeptical at first, but after spending hours getting disconnected by the IRS automated system, I was desperate.

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Melody Miles

•8M

It's not magic - they use an automated system that continuously calls and navigates the IRS phone tree until they get through to a representative. They basically do the waiting for you. When an agent answers, their system connects you to the call. It's completely legit - they don't talk to the IRS on your behalf or access any of your personal information. It works because most people give up after a few tries or can't sit on hold for hours. Their system is persistent and can handle being on hold indefinitely. They're just providing the tech to handle the frustrating part of getting through the phone system.

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Eva St. Cyr

•8M

I have to publicly eat my words about Claimyr. After posting my skeptical comment, I decided to try it myself since I had some immigration-related tax questions that needed sorting out with the IRS. I was absolutely floored when I got a call back in about 45 minutes with an actual IRS agent on the line. I've literally spent DAYS trying to get through on my own over the past few months. The agent answered all my questions about establishing basis for assets I owned before immigrating and confirmed exactly what others have said here about the step-up in basis rules. For anyone dealing with complex immigration tax situations, being able to actually speak with an IRS representative makes a huge difference. I'm now kicking myself for not trying this service months ago.

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Kristian Bishop

•8M

Just to add some extra info - I'm a tax preparer who handles a lot of new immigrant clients. The step-up in basis rule is correct, but make sure you're aware that different types of assets have different reporting requirements: Real property (like your situation): Report on Schedule D/Form 8949 Foreign financial accounts: May need FBAR filing and Form 8938 Foreign business interests: Potentially Form 5471 or other informational returns Also, keep in mind that if you were on a visa in the US before getting your green card, your residency start date might be earlier than you think for tax purposes.

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Kristian Bishop

•8M

Yes, that definitely changes things. For tax purposes, your US residency likely began when you started living in the US on your work visa, not when you got your green card. Most work visa holders (like H-1B, L-1, etc.) meet the "substantial presence test" and become US tax residents much earlier than their green card date. This means your step-up in basis should be calculated based on the value of your property when you first became a US tax resident under the substantial presence test, not when you got your green card. This could significantly impact your tax situation, as you might be liable for taxes on a larger portion of the gain if the property appreciated between your work visa entry and green card approval.

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Chloe Zhang

•8M

Yes, you absolutely can claim a loss if the property decreased in value after you became a US resident. If your basis (the value when you became a US resident) is higher than the sale price, you would report a capital loss on your US tax return. These losses can offset capital gains and up to $3,000 of ordinary income per year, with any excess carried forward to future tax years. Just make sure you have proper documentation of the property's value at your residency date.

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Carmen Ortiz

•6M

This is such a relief to read! I'm in a very similar situation - I immigrated to the US 6 months ago and have been dreading dealing with my foreign investments when I eventually sell them. I had no idea about the step-up in basis rule for new immigrants. One question though - does this rule apply to all types of foreign assets, or just real estate? I have some stocks and mutual funds in my home country that have appreciated significantly over the years, but most of the gains happened before I became a US resident. Would the same step-up basis principle apply to those investments as well? Also, is there a specific time limit for when you need to establish this basis? Like, do I need to get appraisals of all my foreign assets immediately upon becoming a US resident, or can I do it later when I'm ready to sell?

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Cameron Black

•5M

Great question! Yes, the step-up in basis rule applies to ALL types of foreign assets when you become a US tax resident - not just real estate. This includes stocks, mutual funds, bonds, and other investments you owned before immigration. For your foreign stocks and mutual funds, you would use their fair market value on the date you became a US resident as your new basis. So if you had stocks worth $50,000 in your home country when you became a US resident, and you sell them later for $55,000, you'd only pay US tax on the $5,000 gain that occurred after becoming a US person. As for timing - while there's no strict deadline to establish basis, it's much easier to document values closer to your residency date. I'd recommend getting statements or valuations from your foreign brokers showing account values around your US residency start date. The longer you wait, the harder it becomes to prove what assets were worth at that specific time. You don't need formal appraisals for publicly traded securities - broker statements showing market values on or near your residency date should be sufficient documentation for the IRS.

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Oliver Schulz

•5M

This thread has been incredibly helpful! I'm actually going through a similar situation right now - just became a permanent resident last month and I'm sitting on some foreign real estate that I need to sell soon. One thing I'm wondering about is the documentation requirements. Everyone mentions getting appraisals around your residency date, but what if you didn't think to do that at the time? I became a resident in January but didn't realize I'd need to sell my property until now. Would a current appraisal be acceptable if I can also provide documentation showing the property market trends in my area to demonstrate that values haven't changed much since January? Or is the IRS pretty strict about having valuations from the actual residency date? Also, for anyone who's been through this - did you face any additional scrutiny during tax filing because of the step-up basis adjustment? I'm worried about triggering an audit by claiming this basis step-up.

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Miguel Ortiz

•4M

I was in a very similar situation - became a resident in February but didn't get an appraisal until May when I decided to sell. The IRS was actually pretty reasonable about it. I used a current appraisal but also provided supporting documentation showing market stability in my area (comparable sales data, local market reports, etc.). The key is being able to demonstrate that the current value reasonably reflects what the property would have been worth on your residency date. If you can show the market hasn't moved much since January, you should be fine. Real estate markets don't typically fluctuate dramatically over a few months unless there's been some major local event. As for audit concerns - I filed with the step-up basis adjustment and didn't face any additional scrutiny. The IRS sees this situation fairly regularly with new immigrants. Just make sure you attach a clear statement explaining the basis adjustment due to your immigration status change and keep all your documentation organized in case they do ask questions later. The most important thing is having a paper trail that logically supports your position. Better to have a reasonable approximation with good supporting evidence than to pay tax on gains that accrued before you were even a US person!

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Daniel Washington

•4M

This is exactly the kind of detailed discussion I was hoping to find! As someone who just went through the green card process myself (got approved 3 months ago), I had no idea about the step-up basis rule until reading this thread. I'm in a slightly different situation - I have a mix of foreign rental properties and investment accounts that I've been putting off dealing with because I was terrified of the tax implications. Reading everyone's experiences here gives me so much more confidence about how to approach this properly. One quick question for the group - has anyone dealt with foreign rental properties specifically? I'm wondering if there are any special considerations for properties that were generating rental income before immigration. Do I need to worry about depreciation recapture on the pre-immigration period, or does the step-up basis rule handle that as well? Also, huge thanks to everyone who mentioned the various tools and services - I'm definitely going to check out taxr.ai and potentially Claimyr if I need to talk to the IRS directly. It's so reassuring to know there are resources out there specifically designed to help with these complex immigration tax situations!

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Sean Doyle

•3M

Great question about rental properties! I actually dealt with this exact situation when I immigrated two years ago. The good news is that the step-up basis rule does handle depreciation recapture issues for the pre-immigration period. When you become a US tax resident, you essentially get a "fresh start" with your foreign rental properties. Your new basis becomes the fair market value on your residency date, and any depreciation that occurred before you became a US person is irrelevant for US tax purposes. You only need to worry about depreciation recapture for any depreciation you claim on your US tax returns going forward. So if your rental property was worth $400k when you became a US resident, that becomes your basis regardless of what you originally paid for it or how much depreciation you claimed in your home country. If you sell it later for $420k, you'd only pay US tax on the $20k gain (minus any US depreciation you claimed in the meantime). Just make sure to get a solid appraisal around your residency date and keep detailed records of any rental income and expenses from that point forward for US tax purposes. The tools mentioned in this thread should definitely help you navigate the paperwork side of things!

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Kingston Bellamy

•3M

This thread has been incredibly educational! I'm scheduled to receive my green card next month and I've been losing sleep over how to handle my foreign assets. I own several properties and investment accounts back home that have appreciated significantly over the past decade. Reading about the step-up basis rule is such a relief - I had assumed I'd be taxed on all gains from the original purchase dates. The fact that I only need to pay US taxes on appreciation after becoming a resident makes so much more sense from a fairness perspective. I'm definitely going to start gathering documentation now to establish fair market values around my green card approval date. Based on everyone's advice here, it sounds like I should get formal appraisals for my real estate and account statements from my brokers for the investment accounts. One thing I'm curious about - has anyone dealt with foreign business ownership in this context? I own a small business back home that I'll eventually need to sell. I'm assuming the same step-up basis principle would apply, but I imagine the valuation process for a private business might be more complex than real estate or public securities. Thanks to everyone who shared their experiences and the helpful resources - this community is amazing for navigating these complex immigration tax situations!

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Mei Zhang

•2M

Foreign business ownership is definitely more complex, but the same step-up basis principle does apply! I went through this with a small manufacturing business I owned before immigrating. The key challenge is establishing fair market value for a private business, which typically requires a professional business valuation. You'll want to get a formal business appraisal from a certified valuer around your green card approval date. This is more involved than real estate appraisals since they need to analyze financials, market conditions, comparable transactions, etc. But it's absolutely worth it - in my case, the business had grown significantly over the years, so having the stepped-up basis saved me tens of thousands in capital gains taxes when I eventually sold. Also be aware that ongoing business ownership while being a US resident triggers additional reporting requirements (like Form 5471 for foreign corporations). The business valuation will also be useful for these annual filings. I'd recommend consulting with a tax professional who specializes in international business taxation - the complexity definitely warrants professional guidance beyond what the online tools can provide. Start the valuation process early since it can take several weeks to complete properly!

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Tobias Lancaster

•2M

As someone who works in international tax compliance, I want to emphasize how important it is to get this right from the start. The step-up basis rule for new immigrants is one of the most beneficial provisions in the tax code, but it requires proper documentation. A few additional points that might help others in similar situations: 1. **Timing matters for residency determination** - If you were on a work visa before your green card, your tax residency likely started earlier under the substantial presence test. This could significantly impact your step-up basis date. 2. **Keep contemporaneous records** - While you can get appraisals after the fact, having documentation close to your actual residency date is much stronger. Bank statements, broker reports, or property tax assessments from around that time can all support your position. 3. **Consider professional help for complex situations** - While the online tools mentioned here are great for straightforward cases, if you have multiple foreign entities, rental properties, or business interests, the reporting requirements get complex quickly. Forms 3520, 5471, 8865, and others might be needed beyond just the capital gains reporting. 4. **State taxes vary** - Don't forget that your state might have different rules. Some states don't recognize the federal step-up basis adjustment for immigrants. The relief you're all expressing about this rule is completely understandable - it really does make the tax system much fairer for new Americans!

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StarSeeker

•2M

This is incredibly helpful information! As someone just starting to navigate this process, the point about state taxes potentially having different rules is something I hadn't even considered. Do you know if there's an easy way to check how my specific state handles the step-up basis for immigrants, or would I need to consult with a local tax professional? Also, regarding the substantial presence test - I'm realizing I might need to recalculate my residency start date. I was on an H-1B visa for about 14 months before getting my green card last month. Would my tax residency have started when I first arrived on the H-1B, or is there some calculation involved based on days present in the US? Thank you so much for breaking down all the different forms that might be needed - I had no idea about most of those beyond the basic Schedule D reporting!

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