Double taxation

Trying to figure this one out.

US citizen (retired) living permanently in the UK

-US pension is a little over $18k
-UK bank interest £2552 (my half of the interest) or about $3666 at 1.319 from Exchangerate.org....couldn't find at IRS.
-Anybody know the IRS official exchange rate for 2025? Is it the same as above?
-Am I able to ignore that £ interest for US taxes since I am paying it in the UK? Or at least notify the IRS on a tax relief form.

Last time I tried I still couldn't do my US taxes online.....I notice the IRS has something that lets you do them since my income is way under the max limit. Anybody use these online sites? It's been years since I was able to use Turbotax.

I use this average rate: https://www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates (not yet published).
As for the interest, the IRS will want to know of all of it, (worldwide income). You'll file IRS form 1116 with the tax paid to HMRC, which will be used as a credit to the IRS against their assessment. As the U.K tax rate is higher, you will be able to use the difference between the two amounts as a 'bank' which can be carried back one year and forward 10. Essentially, there will be no IRS tax liability.

I've always found TaxAct to be the best, BUT you need a payment card with a U.S. address. 

I use this average rate: https://www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates (not yet published).
As for the interest, the IRS will want to know of all of it, (worldwide income). You'll file IRS form 1116 with the tax paid to HMRC, which will be used as a credit to the IRS against their assessment. As the U.K tax rate is higher, you will be able to use the difference between the two amounts as a 'bank' which can be carried back one year and forward 10. Essentially, there will be no IRS tax liability.

I've always found TaxAct to be the best, BUT you need a payment card with a U.S. address.

+1 We declare all UK interest and file 1116 with the IRS every year

The IRS also accepts the exchange rate on XE.com which holds historical tables.

The OP will probably get the first £1,000 of interest tax free by HMRC.

Thanks. Yeah, I get to write off the £1k of interest here in the UK. The last couple of years I've just closed my eyes and paid the tax in both countries since it was easier.

No address in the US....only a UK credit card+debit cards. When I did a google search the other day about trying to submit IRS taxes online from the UK it just sent me to this site https://www.irs.gov/e-file-do-your-taxes-for-free   Not sure if it will let me or not until I try to use the site.....

Just took another look at the IRS free site.....they just keep mentioning the US states and DC, so likely just have to do everything by hand. You would think it would be a simple fix so that people living overseas could do their taxes online......

Yeah, the IRS don't make it easy do they.

One thing that comes to mind is The Shawshank Redemption where a prison guard is lamenting the taxes he was paying and the main character, a prisoner (ex-accountant) played by Tim Robbins, says to the guard "How much do you trust your wife?"

You could always put all or most of your savings in your wife's name to avoid paying any US taxes on the interest. In the year before we moved back I took my name off all our joint accounts in the USA. While here all the UK savings accounts we opened are in my wife's name because I am in the HMRC 40% bracket and she is in the 20% bracket.

Mostly have done the same thing. When we opened a few savings accounts, several wouldn't take me because I'm not a UK citizen....so most of our savings are in my wife's name. Doesn't really save money though since she has to pay tax on that interest here in the UK. She has been getting the US SS for a few years now plus a couple of small pensions....that plus the bank interest and she is paying a fair bit of UK tax...and the bigger State pension is coming this summer. When we bought a house moving back in 2015 I'd read that it might be better if it isn't in my name since if selling the US would possibly want some money off the profit so we put it in my wife's name only.....that made her VERY uncomfortable. We've since blown a ton of money on moving down the street into a nicer house that needed fixing so we have less savings....but taxes still need to be paid. I don't really owe that much tax...probably in the $400 range or so.....haven't taken a close look yet. My pension is only a little over $18k and plus the $3500 or so of interest it doesn't amount to much. I pay more taxes here in the UK because of the SS. I'm just trying to figure out how to do the double tax bit.

All I've been doing the last few years is pulling out last years taxes and copying almost all of it down with some adjustments for different income/interest amounts. If any of the reporting banks ever change their addresses I might be in trouble.

It sounds like you have everything under control. Good move with the house I think. The last chunk of US taxes that Boris Johnson had to pay before he could give up his US citizenship was the capital gains tax on the sale of his primary residence which is tax free in the UK but not in the US, at the kind of amounts he had.

I’ve always just bitten the bullet and bought tax software to file our US taxes each year and retain a US credit card just for that purpose.

With this latest house....it's in both names. My wife was getting pretty paranoid about it only being in her name. We bought the house at a pretty decent discount because of the work that needed doing. What I've never understood is that if you buy the house at £375K like we did and put about £120K into it and then sell it for over £500K "they" say you made a big profit.

With this latest house....it's in both names. My wife was getting pretty paranoid about it only being in her name. We bought the house at a pretty decent discount because of the work that needed doing. What I've never understood is that if you buy the house at £375K like we did and put about £120K into it and then sell it for over £500K "they" say you made a big profit.

Only the IRS will “say” this, not HMRC.

There are IRS rules as to what is a capital improvement and what is maintenance. When we sold our house in the USA and had to complete the cap gains section on the IRS return I knew what capital improvements we had made, such as a new kitchen. Capital improvements are added to the initial purchase price when calculating the cap gains. We were well below the $500k allowable tax free cap gain. If the £120k you have put into your house is all upgrades rather than repairs then the value of your house for the purpose of the cap gain calculation is £475k so if you sold it for £500k then the cap gain would only be £25k.

As my wife is saying......we are in this house until they drag us out. At that point....I don't think I could give a monkeys..*****.

As my wife is saying......we are in this house until they drag us out. At that point....I don't think I could give a monkeys..*****.

It certainly is a non-issue if you die before your wife because she will inherit your share of the house tax free from the IRS.

Providing you are JT with the Land Registry.