Tax implications of selling foreign property after becoming US resident - how to handle pre-immigration assets?

Thanks for this info! I'm in a similar situation but wondering about timing. If I've been in the US for 2.5 years already and haven't lived in my foreign property since then, have I lost the ability to claim that primary residence exclusion? And for the FBAR filing, is that annual or do I only file it when I'm actually transferring the money?

You still might qualify for the exclusion since the rule requires you to have used the home as your main residence for at least 2 of the 5 years before the sale. Even though you've been in the US for 2.5 years, if you lived in the property for at least 2 years within the 5-year period ending on the date of sale, you should qualify. The FBAR is an annual filing requirement that applies if your foreign financial accounts exceeded $10,000 in aggregate at any point during the calendar year. This is separate from the actual transfer of funds - you need to file it regardless of whether you move the money to the US or not, as long as you meet that threshold.

Did they help with FBAR filing too? I have accounts in multiple countries and always struggle with reporting requirements. Getting stressed just thinking about potentially missing something and facing those massive penalties.

How is this different from just talking to a regular international tax accountant? I've looked into those and the quotes I got were astronomical. Does this actually save money or is it just another expensive service?

Yes, they absolutely helped with FBAR filing too! They have a specific feature that analyzes all your foreign accounts and tells you exactly which ones need to be reported and how. It even helps you keep track of maximum balances throughout the year which is what trips most people up. Compared to an international tax accountant, it's much more affordable. I was quoted $3-5K for help with my situation, but this was significantly less expensive while still giving me detailed guidance specific to my situation. It's not just generic advice - it actually analyzes your specific circumstances and provides personalized guidance.

Wait, how does this actually work? Is it like paying to skip the line at the IRS? I didn't know that was even possible. I've been waiting on hold forever trying to get answers about my foreign rental property income.

This sounds like a scam. The IRS doesn't let people pay to cut the line. I'm calling BS on this.

It's not about paying to skip the line - they use technology to continuously call the IRS for you using their system rather than you having to sit on hold for hours. When they reach an agent, they call you and connect you directly. You're still talking to the same official IRS representatives, just without the multi-hour wait time. No, it's definitely not a scam. I was skeptical too, but I got connected to an actual IRS agent who provided official guidance. You're still speaking with real IRS employees - the service just handles the painful hold time for you. Check out the video link I shared to see exactly how it works.

Good point about foreign taxes! Do you know if I need to file a tax return in my home country for the year of sale even though I no longer live there? And how exactly does the foreign tax credit work - is it a dollar-for-dollar reduction?

Yes, most countries require you to file a non-resident tax return for property sales even after you've moved away. The exact requirements depend on the specific country, but generally you'll need to report the sale and pay any applicable capital gains tax there. The foreign tax credit is indeed a dollar-for-dollar reduction of your US tax liability based on qualified foreign taxes you've paid. You claim it using Form 1116. It doesn't reduce your income, but rather directly reduces your tax bill. There are limitations though - you can't claim more in credits than your US tax liability on that foreign income.

Yeah, don't mess around with FATCA. Form 8938 is required if your foreign financial assets exceed certain thresholds (varies based on filing status and whether you live in the US or abroad). For single US residents, it's $50K on the last day of the year or $75K at any time during the year. Penalties start at $10K for failure to file.

This is really valuable advice about the step-up in basis! I had no idea this was even a consideration. Just to clarify - when you say "as of the date you became a US resident," would that be when I first entered the US or when I officially received my green card? There was about a 3-month gap between when I moved here and when my conditional green card was approved. Also, does it matter if I get the appraisal now (retrospectively) or did it need to be done at the time I became a resident? Thanks for bringing this up - definitely something I need to look into further!

Great question about the timing! For tax purposes, you generally become a US resident for tax purposes on the date you first become a lawful permanent resident (LPR), which would be when your green card becomes effective, not necessarily when you physically entered the US. However, there are some nuances here - if you were present in the US and met the substantial presence test before getting your green card, you might have been considered a resident earlier. As for the appraisal timing, while it's always better to have contemporaneous documentation, you can still get a retrospective appraisal. Many qualified appraisers can provide a "date of value" appraisal that determines what the property's fair market value was on a specific past date (like when you became a US resident). They use historical market data, comparable sales from that time period, and other methods to establish the value as of that earlier date. I'd strongly recommend consulting with a tax professional who specializes in international taxation to determine the exact date that matters for your situation and help you get the proper documentation. The potential tax savings from establishing a higher basis could be substantial, especially if your property has appreciated significantly.

This is incredibly helpful advice! I'm just starting to navigate this process myself and the documentation aspect is something I definitely need to get organized on. Quick question about the currency conversion - when you say "exchange rate from the date of each transaction," does that apply to every single improvement I made to the property over the years? I did several renovations spanning different years. Also, did you find any particular banks that were better for large international transfers, or is it mostly just about shopping around for the best rates and fees?

Yes, technically each improvement should be converted using the exchange rate from when you made that specific expenditure. I know it sounds tedious, but it's worth it for accuracy and potential tax savings. For my renovations that spanned multiple years, I had to go back through bank statements and receipts to get the dates, then look up the corresponding exchange rates. As for banks, I found that larger international banks like Citi and HSBC tend to have better rates and lower fees for substantial transfers, especially if you're already a customer. Wise (formerly TransferWise) was also competitive for my transfer amounts. Credit unions sometimes have surprisingly good international wire rates too. Whatever you do, avoid using your regular bank's standard international wire service without comparing - the markup can be brutal. One tip: some banks will negotiate fees if you're transferring a large amount. I saved about $200 just by asking if they could waive or reduce the wire fee for my transfer. Also, timing matters - try to avoid transfers on Fridays or before holidays as they can get delayed.

This is such valuable information about establishing fair market value at the time of becoming a US resident! I had no idea this was even possible and it sounds like it could save a fortune in taxes. Quick question - did you need to get a formal appraisal done, or were you able to use other documentation like comparable sales or online property valuations from that time period? Also, when you mention state taxes, does the state where I currently live determine this, or the state where I first established residency when I moved to the US? I moved from Texas (no state income tax) to New York last year, so the timing of my property sale relative to my move could make a big difference in my tax bill!

For the fair market value documentation, I didn't get a formal appraisal at the time (wish I had!), but I was able to use comparable sales data from that period. I gathered sales of similar properties in my area from around the date I became a US resident, used online valuation tools like Zoopla that show historical estimates, and even got a retrospective valuation letter from a local estate agent. The IRS accepted this documentation, though a formal appraisal would have been stronger evidence. Regarding state taxes, it's based on where you're a resident at the time of the sale, not where you first moved. So if you sold while living in New York, you'd likely owe NY state taxes on the gain. The timing of your move could definitely impact your tax bill significantly! You might want to consider the timing of your sale relative to establishing residency in different states if you have flexibility. Also keep in mind that NY has some specific rules about part-year residents, so if you moved mid-year, the calculation could get more complex.