Tax implications when selling foreign land with proceeds deposited to US bank account

Yes, you'll likely need to report this sale on your US taxes. When you sell foreign property as a US taxpayer, it's generally treated as a capital gain regardless of where the money is deposited. What matters is that you own the asset and are selling it for a profit. You'll need to determine your cost basis (what the property was worth when you acquired it) and then calculate the gain based on the sale price minus that basis. Since you inherited the property, your basis would typically be the fair market value of the land on the date of inheritance (this is called a "stepped-up basis"). You should also check if the country where the land is located has any tax obligations on the sale. The US has tax treaties with many countries to prevent double taxation, but you might need to file tax forms in both places. Form 8938 (Statement of Foreign Financial Assets) and possibly FBAR filings might be required too if you had foreign accounts above certain thresholds. I'd strongly recommend consulting with a tax professional who has experience with international transactions before finalizing the sale.

Just wanted to share my experience - I was in a similar situation last year with property in Spain. I found this service called taxr.ai (https://taxr.ai) that really helped me figure out the international property sale reporting. They analyzed all my documents and gave me clear guidance on forms like the 8938 and FBAR requirements the previous commenter mentioned. The thing I found most useful was that they could look at the Spanish property documents (which were all in Spanish) and help determine my correct basis in the property. They also explained how the US-Spain tax treaty applied to my situation, which saved me from double taxation. You might want to check them out since foreign property transactions can get complicated quick.

I just wanted to follow up about my experience with taxr.ai after a few people recommended it. I uploaded my Thai property documents and purchase history, and they were able to sort through everything including calculating the correct basis with all the currency conversion factors. They even identified a partial exclusion I qualified for that my regular accountant missed! The report they generated made it super clear what forms I needed and how to report everything correctly. Definitely worth it for the peace of mind when dealing with international property sales. I'm confident my filing is correct now instead of just hoping I didn't miss anything.

If you're dealing with foreign property sales, you might also run into issues getting through to the IRS if you have questions. I discovered a service called Claimyr (https://claimyr.com) that got me through to an actual IRS agent when I had questions about my foreign property sale. They have a demo video here: https://youtu.be/_kiP6q8DX5c that shows how it works. I was skeptical at first, but after waiting on hold with the IRS for hours over multiple days with no luck, I gave it a try. Within about 20 minutes I was talking to a real person who helped clarify exactly how to report my foreign property sale and what supporting documentation I needed to include with my return. Saved me tons of time and frustration.

I need to apologize and follow up on my skeptical comment about Claimyr. After struggling for weeks to reach someone at the IRS about my foreign income questions, I decided to try it out of desperation. I honestly couldn't believe it worked! Within 35 minutes I was connected to an IRS representative who specialized in international tax issues. They helped me understand exactly how to report my foreign property sale and confirmed I was eligible for the Foreign Tax Credit. This would have taken me countless hours of repeated calls on my own. Sometimes it pays to be wrong! Just wanted to share my experience in case anyone else is dealing with similar international tax questions and needs clarification directly from the IRS.

Don't forget about FATCA requirements! In addition to reporting the capital gain, you may need to file Form 8938 if your foreign assets exceed certain thresholds. The thresholds vary based on filing status and whether you live in the US or abroad. Also, if you had any foreign bank accounts related to this property (maybe for collecting rent, property expenses, etc.) that exceeded $10,000 at any point during the year, you need to file an FBAR (FinCEN Form 114). The penalties for not filing these forms can be steep, even if you didn't owe any tax.

Just curious - has anyone here used an installment sale for foreign property? The buyer of my land in Mexico wants to pay me over 3 years instead of all at once, and I'm not sure how to report this on US taxes.

This is a complex situation that definitely requires careful attention to US tax obligations. Since you're a US taxpayer, you'll need to report this foreign property sale regardless of where the proceeds are deposited - the location of the bank account doesn't change your tax liability. A few key points to consider beyond what others have mentioned: 1. **Timing of recognition**: The sale will be taxable in the year it closes, not necessarily when you receive all the money (unless you structure it as an installment sale). 2. **State tax implications**: Don't forget to check if your state has any additional reporting requirements for foreign asset sales. 3. **Record keeping**: Start gathering all documentation now - original purchase/inheritance records, any improvements made to the property, foreign taxes paid, and currency exchange rates on relevant dates. 4. **Professional help**: Given the complexity with inheritance basis, potential foreign tax credits, and various reporting forms (8938, FBAR, etc.), I'd strongly echo the advice to work with a tax professional experienced in international transactions. The cost of professional help is usually much less than the penalties for getting these filings wrong. The fact that payment is coming directly to your US account might actually simplify some aspects, but it doesn't reduce your reporting obligations. Make sure you have a clear paper trail of the entire transaction.