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How to Sell Foreign Property and Use the Proceeds to Buy a US Home

The returning expat who owns property abroad and wants to use the proceeds for their US purchase is executing a multi-step international financial transaction. US capital gains tax on the foreign sale. Possible withholding in the country of sale. Currency conversion timing. International wire transfer. And the US lender source-of-funds requirement on the other end. Each has a correct order of operations.

US Tax on Foreign Property Sale

When a US citizen sells real property located outside the US, the gain is subject to US capital gains tax regardless of where the seller lives. (1) Gain calculation: sale price minus adjusted basis (original purchase price plus improvements, converted to USD at exchange rates on each transaction date). (2) Tax rates: long-term (held 1+ year): 0%, 15%, or 20% depending on income. Short-term: ordinary income rates. (3) Foreign Tax Credit: Form 1116 offsets US tax for capital gains taxes paid in the country of sale. Prevents true double taxation in most cases. (4) Section 121 does NOT apply: the $250K/$500K primary residence exclusion applies only to US property. A foreign primary residence sale does not qualify.

Currency Risk and Conversion Timing

The expat selling their London flat for £900,000 for a $1.2M Miami home is exposed to currency risk between the UK sale and the US closing. The risk: GBP weakening 5% against USD between sale and closing = $60,000 fewer dollars. Hedging: forward currency contracts lock in an exchange rate for a future date. Cost: 0.5-1.5% of transaction. Available through currency specialists and some banks. Timing strategy: convert and wire as soon as foreign sale proceeds are available. Do not try to time the currency market. Wire transfer: international wires to US accounts take 3-10 business days. Some countries require AML documentation extending this. Plan 30+ days before US closing.

The 30-Day Float Rule

The client who planned to close their US home 10 days after the Australian sale discovered international AML compliance and bank verification took 9 business days. Money arrived with one day to spare. The specialist who serves returning expats builds 30 days of float between the foreign sale and the US closing. Not 10. Not 5. Thirty.

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Frequently Asked Questions

Do I pay US capital gains tax when I sell foreign property?

Yes. US citizens pay US capital gains tax on gains from foreign property sales. A Foreign Tax Credit (Form 1116) may offset the US tax for capital gains taxes paid in the country of sale. Section 121 primary residence exclusion does NOT apply to foreign property.

How long does an international wire transfer take?

3-10 business days for international wires, longer if AML documentation is required. Plan 30+ days between the foreign sale and the US closing date.

What is currency risk in this transaction?

The exchange rate between the foreign sale proceeds currency and USD can move 3-8% in weeks. Forward currency contracts lock in the rate. Available through currency specialists at 0.5-1.5% of the transaction.