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How are profits from selling a rental property abroad taxed by the US?

For US citizens and green card holders living in Qatar, profits from selling a rental property are subject to US capital gains tax. This includes depreciation recapture, which adjusts the property’s cost basis and can increase the taxable gain. Additionally, if the mortgage is settled at sale, it’s important to check the loan terms for potential phantom gains.

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Can capital gains be excluded under the Foreign Earned Income Exclusion?

No, capital gains are not covered by the Foreign Earned Income Exclusion (FEIE). The FEIE applies only to earned income, so profits from selling a rental property in Qatar remain taxable in the US.

How are taxes handled when selling a principal residence in Qatar?

Selling your principal residence can offer significant tax breaks. If you’ve lived in the property for at least two of the five years before selling, you can exclude up to $250,000 (or $500,000 for joint filers) from your taxable income. This exclusion can greatly reduce or even eliminate the capital gains tax on the sale.

Can home improvement and sale expenses reduce my taxable gain?

Yes, home improvement costs and certain sale-related expenses can increase your property’s cost basis, which can lower the capital gain or increase a loss. This adjustment can significantly impact the capital gains tax you owe, potentially providing substantial tax savings.

Why partner with a specialist Expat accountant?

Living outside of the US can make your tax filing requirements complicated. To ensure you pay the minimum amount of taxes, it’s critical to work with an accountant who understands every aspect and avenue for reducing your tax liability. We have a dedicated team of tax accountants who work exclusively with US expats earning and investing in Germany. Partnering with a specialist expat accountant can help you navigate complex tax regulations and optimize your tax situation.


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