Educational only (not legal or tax advice) Cross-border real estate is fact-specific and rules can change by year and country.
If you’re a U.S. tax resident (green card holder or meet the substantial presence test) or a U.S. citizen, the U.S. generally taxes you on worldwide income, including capital gains from selling real estate located outside the United States.
This FAQ explains what’s typically taxable, how to calculate the gain, what forms are commonly involved, and how to avoid common reporting mistakes.
1) If I sell my home overseas and wire the money to the U.S., is the transfer itself taxable?
Usually no.
A wire transfer (or receiving sale proceeds into your U.S. bank account) is not, by itself, “income.” What’s taxable (if anything) is the gain you earned on the sale—calculated under U.S. tax rules.
What the IRS cares about is:
- Did you sell a capital asset (in this case a foreign property)?
- Did you have a gain after applying U.S. basis rules?
- Did you properly report the transaction on your U.S. return?
2) Do I pay U.S. tax on the full sales price, or only on the profit?
Generally, only on the profit (capital gain). Simple concept:
- Sales price (minus selling costs like commissions/fees)
- minus
- Your basis (generally what you paid + certain closing costs + capital improvements, adjusted for depreciation if it was a rental)
- = capital gain (or loss)
If it was personal-use property, a loss is generally not deductible, but a gain is taxable.
3) I bought the property before I moved to the U.S. Does the U.S. “step up” my basis when I become a resident?
Usually no. In most cases, your basis remains your actual cost basis, not a “reset” to fair market value when you became a U.S. resident. This is one of the most common surprise issues for new immigrants: you may have owned the home for years abroad, but once you are a U.S. tax resident, the U.S. applies its normal capital gain rules when you sell.
4) How do exchange rates affect my U.S. capital gain?
Big time. The U.S. return is reported in U.S. dollars, and foreign-currency transactions generally must be translated into USD using appropriate exchange rates.
- Your purchase price is translated to USD using the rate around the purchase date
- Your sale proceeds are translated to USD using the rate around the sale date
Result: even if your gain looks small in local currency, your USD gain can be larger (or smaller) because of exchange-rate movement.
5) Can I exclude the gain like the U.S. “primary residence exclusion” ($250k / $500k) even if the home is overseas?
Possibly—if it truly was your main home and you meet the ownership/use tests. The general U.S. rule allows many taxpayers to exclude up to:
- $250,000 gain (single) or
- $500,000 gain (married filing jointly)
if they meet the eligibility requirements (ownership and use tests, plus other rules).
Key practical point: If you moved to the U.S. years ago and the foreign home has been mostly vacant (or not your main home), the exclusion often won’t apply.
6) What tax rate applies to the gain?
If you held the property more than 1 year, it’s generally a long-term capital gain, taxed at preferential rates (commonly 0% / 15% / 20%, depending on taxable income and year). The IRS worksheets used with Schedule D reflect these rate brackets.
Also watch for the Net Investment Income Tax (NIIT) of 3.8% if your income is above certain thresholds (commonly $200k single / $250k MFJ).
7) What if my home was rented out (even informally) or used as an investment?
Then you may have extra complexity, including:
- depreciation adjustments (and possible depreciation recapture),
- different gain character,
- stronger documentation needs (dates, rental periods, expenses).
This is one of the situations where “DIY software + estimates” can go sideways quickly.
8) I paid tax in the foreign country on the sale. Do I get taxed twice?
Not necessarily. If the foreign country imposed an income tax (or similar tax) on the gain, you may be able to claim a Foreign Tax Credit on Form 1116, which can reduce U.S. tax (subject to limitations and sourcing rules).
This is often the main lever to reduce or eliminate double taxation—assuming the tax qualifies and is properly documented.
9) What documents should I keep?
Keep a clean “audit-ready” package:
- Purchase documents (closing statement, deed, proof of what you paid)
- Proof of capital improvements (renovation invoices, materials, contractor receipts)
- Sale documents (contract, closing statement, fees/commissions)
- Proof of foreign taxes paid/withheld (tax receipt, withholding statement, settlement statements)
- Exchange-rate support (or methodology) used for USD conversion
- If applicable, rental history and depreciation records
10) Do I need FBAR or FATCA (Form 8938) just because I sold foreign real estate?
Owning foreign real estate directly is not, by itself, an FBAR/8938 filing trigger. But holding the sale proceeds in a foreign financial account can trigger reporting.
- FBAR (FinCEN 114): generally required if foreign financial accounts exceed $10,000 in aggregate at any time during the year.
- Form 8938 (FATCA): separate regime with different (often higher) thresholds and rules.
The IRS provides a comparison that also clarifies that directly held foreign real estate isn’t a “financial account” for these purposes, while foreign accounts holding cash typically are.
11) Is it “suspicious” if I receive the money in multiple transfers from different sources?
Usually not—large cross-border transactions are common. What matters is:
- the transfers are legitimate and traceable to the sale,
- the sale and gain are properly reported,
- and any foreign account reporting (FBAR/8938) is handled if applicable.
Practical tip: keep a simple file that ties each incoming wire to the settlement paperwork.
12) What if I bring the money physically (cash) instead of wiring it?
If you physically transport currency/monetary instruments over $10,000 into (or out of) the U.S., it generally must be reported on the appropriate form (FinCEN Form 105 / CMIR). Wires are usually cleaner for compliance and recordkeeping.
13) Will this increase my audit risk?
No one can promise “no audit.” But selling a foreign property and correctly reporting it is normal. Audit risk usually rises when returns contain:
- missing forms (especially foreign reporting),
- inconsistent reporting (foreign tax credit claimed without support),
- inflated deductions,
- or math/translation errors.
If everything is properly documented and reported, an audit (if it happens) is typically manageable.
Want this handled end-to-end (sale reporting + foreign tax credit + any required foreign disclosures)?
If you’d like a CPA/tax attorney team to prepare the return, compute the gain in USD correctly, apply foreign tax credits, and ensure you’re compliant on any required foreign reporting, book a paid appointment here: https://oandgaccounting.com/appointment-booking-form/
