QUESTION: Hello David I em an naturalised citizen and I just sold my home in mexico . My question is will my money be taxed when it enters the usa . I plan to invest the money in a new house . thanks
---------------------------------------------------------------------------david ingram replies:
There are two problems.
One, unless the home qualified for/as a homestead in Mexico, the sale will be taxed in Mexico.
It used to be that the Mexican home was tax exempt if it was your principal residence for two years but that was cancelled in 2002.
What the Mexican Notary (Notarios) Decide is Critical - the
following was 'lifted' word for word from http://www.bajainsider.com/baja-business/taxes-mexico-real-estate.htm
You may want to read the rest.
Under Mexican Income Tax Law, Notarios are jointly liable with the seller for all taxes due on the sale of real property in Mexico. If Hacienda (the equivalent to the Treasury Department in the US) decides the Notario did not calculate these taxes correctly, the Notario may be required by the tax authorities to make up the difference. Obviously, when they are doing dozens of transactions each year, very possibly involving millions of U.S. dollars, Notarios have to be very careful and will generally take a conservative approach.
The homestead tax exemption is still available to resident taxpayers in Mexico, and it is the Notario who decides who meets the requirements of tax residence. To make this determination, Notarios can base their decision on two different sets of laws: Mexican tax laws and Mexican immigration laws.
Since the Mexican Notary (Notario) is jointly responsible for the capital gains tax on real estate if it is due, the notary becomes the tax collector for the government. As a consequence, foreigners are having a hard time getting a tax free exemption. San Miguel sales are a crap shoot with some people getting tax free status and others not. each case is being dealt with on an individual basis. In Mexico City, Foreigners are routinely granted tax free status. In most other places foreigners are being taxed on the sale of their Mexican home.
1. However, if you are a Mexican National and this is/was your family home, it should be tax free.
2. If you have a green card, you are taxable on your world income and the sale of a Mexican, Canadian, Australian or Ethiopian home/house is reportable and maybe taxable. However, again, if it is the only home you own and you have physically occupied it for 24 out of the 60 months before sale, you are eligible for up to $250,000 per owner tax free on your US 1040.
Another factor is to 'top up' the value of the home on the day you actually immigrated to the USA.
So the money is not taxable when you take it to the USA to buy your home there but the Mexican sale itself may be taxable in both Mexico and the United states.
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This is not intended to be definitive but in
general I am quoting $900 to $2,900 for a dual country tax
return.
$900 would be one T4 slip one W2 slip one or two
interest slips and you lived in one country only (but were filing both
countries) - no self employment or rentals or capital gains - you did not move
into or out of the country in this year.
$1,100 would be the same with one rental
$1,300 would be the same with one business no
rental
$1,300 would be the minimum with a move in or out
of the country. These are complicated because of the back and forth foreign tax
credits. - The IRS says a foreign tax credit takes 1 hour and 53
minutes.
$1,600 would be the minimum with a rental or two in
the country you do not live in or a rental and a business and foreign tax
credits no move in or out
$1,700 would be for two people with income from two countries
$2,900 would be all of the above and you moved in
and out of the country.
This is just a guideline for US / Canadian
returns
We will still prepare Canadian only (lives in
Canada, no US connection period) with two or three slips and no capital
gains, etc. for $175.00 up.
With a Rental for $375
A Business for $375 - Rental and business likely
$500
And an American only (lives in the US with no
Canadian income or filing period) with about the same things in the same range
with a little bit more if there is a state return.
Moving in or out of the country or part year
earnings in the US will ALWAYS be $800 and up.
TDF 90-22.1 forms are $50 for the first and $25.00
each after that when part of a tax return.
8891 forms are generally $50.00 to $100.00
each.
18 RRSPs would be $900.00 - (maybe amalgamate a
couple)
Capital gains *sales) are likely $50.00 for
the first and $20.00 each after that.
Catch - up returns for the US where we use the Canadian return as a guide will be $150 to $500.00 depending upon numbers of bank accounts, RRSP's, existence of rental houses, etc.
Just a guideline not etched in stone.
This from "ask an income trusts tax and immigration expert"
from www.centa.com or www.jurock.com or www.featureweb.com. David Ingram deals on a daily
basis with expatriate tax returns with multi jurisdictional cross and
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