Tax on foreign investment sale?

Question

If my mom (foreigner) was to sell her home in Texas, what are the tax ramifications for her in terms percentage of profit she has to give up to the IRS? Any other tax problems to watch out for?

She does not live in the US and has owned it for over a year. So there is no special tax for foreigners with capital gain?

Answer 1

good question. I am USA citizen and have a canadian stock I have shares in and I have to pay a foreign investment tax of 15% on that. But I dont know how that relates to real estate.

Answer 2

Same as any other taxpayer. If she lived in it for 2 of the 5 years immediately prior to the sale and it was her principal residence, the first $250,000 of gain is not subject to tax if her filing status is Single or $500,000 if her filing status is Married Filing Jointly.

If she does not qualify for the exclusion then it's treated as a capital gain. If she owned it for 1 year or less, it's taxed as ordinary income at her marginal rate. If she owned it for more than 1 year it's taxed at the long-term capital gains rate, normally 15%.

Since she cannot exclude the gain, it's taxed at the long-term capital gains rate, normally 15%. She'll need to file a Form 1040NR return and pay any tax due. Get a copy of IRS Pub 519 from the IRS website for complete information for non-resident alien taxpayers.

Answer 3

The capital gains tax she pays will be the same as a US citizen pays (maximum of 15%).

If her country of residence taxes the gain as well, she may be eligible for a credit from her country of residence since she has already paid US tax on it.

Answer 4

In the 12 months 2007 longer term capital obtain price in US is five% if you're within the 15% bracket; and after 2007 the price drops to zero%. Sell this 12 months and pay five% or wait till 2008 and pay zero%; until the backside falls out earlier than 2008. Your alternative.