Looking for guidance on property improvements and private pension

Hi! New to the forum but I'm in the UK 20+ years and a dual citizen. Think I finally cracked FBAR and 8938 but now have a question on an eventual property sale and my private pension.

So, I with my NRA British spouse bought a house in 2011, at which time the pound was strong. I am pleased to learn that the Brexit silver lining of having a devalued currency is that our eventual sale would take into account the high value of the house at the time in dollar terms, at least AFAICT. (I read that you value it as of the day of the purchase, so like $815k on a £500k purchase, worth probably £1m/$1.2m now.)

Since then, we have converted our loft for £50k and are now in the process of an extensive renovation of our kitchen and dining room that involves removing a chimney and all sorts of malarkey for around another £50k total. My first question is: Do I need to be able to prove (if necessary) that I personally contracted and paid for these works from my own funds if I am applying property improvements to the eventual sale? What if my spouse paid for the works and was the person on the improvements contract? And would I value those improvements as of the date they happened, in terms of currency conversion? We have a joint tenancy.

Second question. What should I be thinking around my private, employer sponsored pension? I could start withdrawing lump sums in a few years, but don't need to, and intend to be working still. Should I try to be phasing distributions in over years to minimize my US tax bill? Adjacent to this -- I have always filled out the minimum IRS paperwork, based on income (1040 and form 2555). Should I be doing something with foreign tax credits? Total mystery to me. So far I have not taken any distributions from the pension and I have not declared any capital gains either, after reading I didn't need to on paper gains or my employer contributions. (hope that's right)

And as long as we're here -- anything to consider in regards to my dual citizen children (born and lived whole lives in the UK) if I were to pass on my property to them by death or decision? Thank you!!!

Hi! New to the forum but I'm in the UK 20+ years and a dual citizen. Think I finally cracked FBAR and 8938 but now have a question on an eventual property sale and my private pension.

So, I with my NRA British spouse bought a house in 2011, at which time the pound was strong. I am pleased to learn that the Brexit silver lining of having a devalued currency is that our eventual sale would take into account the high value of the house at the time in dollar terms, at least AFAICT. (I read that you value it as of the day of the purchase, so like $815k on a £500k purchase, worth probably £1m/$1.2m now.)

Since then, we have converted our loft for £50k and are now in the process of an extensive renovation of our kitchen and dining room that involves removing a chimney and all sorts of malarkey for around another £50k total. My first question is: Do I need to be able to prove (if necessary) that I personally contracted and paid for these works from my own funds if I am applying property improvements to the eventual sale? What if my spouse paid for the works and was the person on the improvements contract? And would I value those improvements as of the date they happened, in terms of currency conversion? We have a joint tenancy.

Second question. What should I be thinking around my private, employer sponsored pension? I could start withdrawing lump sums in a few years, but don't need to, and intend to be working still. Should I try to be phasing distributions in over years to minimize my US tax bill? Adjacent to this -- I have always filled out the minimum IRS paperwork, based on income (1040 and form 2555). Should I be doing something with foreign tax credits? Total mystery to me. So far I have not taken any distributions from the pension and I have not declared any capital gains either, after reading I didn't need to on paper gains or my employer contributions. (hope that's right)

And as long as we're here -- anything to consider in regards to my dual citizen children (born and lived whole lives in the UK) if I were to pass on my property to them by death or decision? Thank you!!!

Welcome to the site.

Hopefully someone will be along that can answer your tax questions. My wife and I are dual citizens living in the UK as is our daughter who recently her house in LA.  We sold our UK house many years ago while living in the USA and had to do the capital gains calculation as well.  In both cases we did have proof of capital improvements but did not submit the documents when we filed our IRS returns.  I believe that the IRS would only ask to see the documents should they decide to audit the return. We also used historic exchange rate tables to convert £s to $s. I would think that if you are filing Married Filing Separately that only your share of the capital gain would be counted.

I have no experience of withdrawing lump sums from a private UK pension scheme. The schemes I am in are final salary and I pay US taxes on the payouts, which are monthly, and use foreign tax credits to recover the taxes paid on our IRS returns. While your private pensions remain within the "pension wrapper" of a SIPP or similar then there are no taxable capital gains. When you start taking distributions they are taxed as regular income by both the US and UK and you would use foreign tax credits.

I don't think the US is involved when you pass on UK property when you die or if you gift money or property to your US/UK children living in the UK.  You will need to be aware of HMRC inheritance rules when giving your children money or property.  (Each time you make a gift a 7 year clock starts ticking so if you die within that window your estate will owe some taxes)

ty @durhamlad!