Moving to UK before US house sells.

I was reading another thread and nuns said :

"1) Sell the house and take the gains before you move to the UK and become UK resident and domiciled for tax purposes so you just have to deal with CGT in the US."

I don't want to clutter that thread so made my own.

I have to leave the USA before the end of the month as I am pregnant and doc says no international flights after 32 weeks.

It's been on the market for 3 months with barely any interest which means along with being bloody frustrating my husband is not about to stay here and wait for the house to sell while I move back to the UK.

I know we are under the amounts for capital gains tax in Louisiana as the house is up for $140k, we owe $90K and have lived here for 6 years. Not even close to the $500k joint filing profit cap.

What are the ramifications of the sale going through once we are in the UK though? Do we lose the ability to claim Private Residence Relief as soon as we land or rent a new place or can we continue to claim the US house as our primary residence until it sells? Or will that screw up our visa processing? Hubby is coming in on a KOL endorsed Spouse visa.

We certainly can't purchase a 'second home' in the UK before the US one sells, I doubt our US sale will even make a down payment on a place in Herts/Essex.

There is no tax in the UK on gains on the sale of a main residence. If thre is a gain, the US is safe from US tax as long you meet the "time test". There are simply no tax problems at all, come over with peace of mind on this!

Thank you, forgive the fretter though:

Is it still my main residence once we move to the UK? What if it takes 6 months to sell? Do we need to inform HMRC upfront that we still consider it our main residence?

And does that have any ramifications on our US/UK tax filings for this/next year? I am a permanent resident who will be officially abandoning my US Residency as soon as I get back to the UK and can file that with the Embassy so I shouldn't have to file a 2012 tax return to the US.

And um really stupid question, how does one define profit? If we purchased for 130K, put 20% down and we sell for 135k. Are we only making 5k profit? Or is profit defined as what ends up in our bank account post sale which is going to be more like 30k once all the closing costs and realtor fees are taken into account. (Mortgage is currently at 90k payoff)

And um really stupid question, how does one define profit? If we purchased for 130K, put 20% down and we sell for 135k. Are we only making 5k profit? Or is profit defined as what ends up in our bank account post sale which is going to be more like 30k once all the closing costs and realtor fees are taken into account. (Mortgage is currently at 90k payoff)

It should be based on the difference of the sale price and the purchase price (whatever amount you've paid off on your mortgage is a bonus). However, it can be affected by closing costs, depreciation, etc, so it's not quite that simple.

If it takes more than 3 years to sell after you live there it is not your PPR for UK purposes after that 3rd anniversary date. No UK tax issues.

The exit tax in the US might concern you if (and only if) you are a long-term green card holder.

Okay, thanks folks.

I think we should be okay then, I was scared we were going to be hit for 18-28% of our life savings which is effectively what the house proceeds will constitute.

Guya, I do qualify as a long term green card holder, been here 9 years now but thankfully, even together, we don't come close to these figures. And hubby has no intentions of revoking his citizenship.:

"Under the mark-to-market exit tax regime, an expatriating individual who has a net worth of at least US$2 million or an average income tax liability for the previous five years of at least US$145,000 (2010 figure, adjusted annually for inflation), or who fails to certify as to compliance with all US federal tax obligations for the previous five years, will be deemed to have sold their worldwide assets for fair market value on the day before expatriation. This “covered expatriate” (CE) will pay tax on any resulting net gains in excess of an inflation-adjusted exclusion amount, currently US$627,000."