Americans have ties internationally, to family and friends throughout the world. This might lead to money transfers from overseas to the U.S., which might result in a tax liability for recipients or senders.
Figuring out your tax liability after receiving a money transfer from overseas is often difficult. When it comes to capital gains from a sale of foreign property, you’ll most likely have to pay either short-term or long-term capital gains taxes. Americans who receive financial gifts from foreign loved ones won’t have to pay taxes on the transfer. However, if you yourself sent funds to an American while abroad, you might. Recipients of foreign inheritances typically don’t have a tax liability in the United States. And, if you’re sending your own money from a foreign bank account to a domestic one, you won’t have to pay taxes on the transfer.
For more advice from the tax CPAs for American expatriates at US Tax Help, call our team today at (541) 362-9127.
Do You Have to Pay Taxes on Money Transferred from Overseas to the US?
Whether you’re sending money from a foreign country as an expat to a loved one in the United States or receiving funds from a relative overseas, it’s necessary to know whether or not you have a tax liability. Paying taxes on transferred funds might be necessary, depending on who’s doing the sending and how much is being received. Our tax CPAs for American expatriates can assess your situation to determine if you have to pay taxes on capital gains, gifts, or foreign inheritances transferred to the U.S. from overseas, or money transferred from one account to another.
Capital Gains
If you recently received a money transfer from overseas after selling a foreign property, your capital gains will be taxed. The extent to which they will be taxed will depend on if they are long-term or short-term capital gains, and our tax accountants can assess your tax liability based on how long you held the foreign property before you sold it.
Americans might receive transfers like this for many reasons. Suppose you invested in real estate abroad and recently sold a property, or you’ve moved back to the United States after a stint as an expat and sold your foreign home. In either case, capital gains from the sale transferred from an overseas buyer to your American bank account will be taxed. Tax rates for short-term and long-term capital gains range vary, depending on your tax bracket.
Gifts
Family members around the world might send financial gifts to one another periodically. If you received a gift from a foreign friend or sent one to an American resident as an expat, you may or may not have a tax liability. First, consider the situation where an American receives a foreign financial gift from abroad. Typically, gift recipients don’t have a tax liability. However, you may have to report a gifted money transfer from overseas to the U.S., which our tax accountants can help you accomplish using IRS Form 3520.
Now, what if you are the one sending a financial gift to the U.S. from overseas? If you’re an American expat, you may have to pay taxes on a money transfer to a U.S. resident if your financial gift exceeds $16,000. That is the gift tax exclusion for the current tax year. If you need to report a transfer of this kind, our tax CPAs can complete IRS Form 709 and submit it by Tax Day.
Inheritances
It’s not uncommon for American citizens to receive inheritances from foreign relatives overseas. The federal government typically doesn’t tax foreign inheritances, but some individual states do. Because of this, it’s important to check your state’s rules if you recently got an inheritance from a relative abroad. If you received a foreign inheritance that included U.S. real property, you might have to pay taxes on that property, specifically. This might impact you if you recently inherited property or assets from an American expatriate who was living overseas and still held property in the United States. If your inheritance from a foreign person exceeds $100,000, you must report it to the IRS using Form 3520.
Personal Bank Accounts
Throughout their lives, expats might go back and forth between living in the United States and living abroad. If you decide to move back to America after time spent overseas, you may transfer the funds from your foreign bank account to your American bank account. Since this isn’t income and is simply moving around your money, you won’t have to pay taxes on the transfer. However, it’s important to note that transferring money from overseas, even if it’s your own money, might trigger some alarm bells from the Financial Crimes Enforcement Network (FinCEN).
For example, suppose you held over $10,000 across all your foreign bank accounts and didn’t submit FinCEN Form 114 to report your foreign financial holdings. Then, say you transferred those funds to a domestic bank account. In that case, FinCEN might start asking you questions. We can help you avoid these issues by properly reporting funds held in foreign bank accounts before transferring that money to an American bank account. If you bring more than $10,000 in cash back into the United States after time spent abroad, you must declare it using U.S. Customers and Border Patrol Form 6059B and FinCEN Form 105. This also applies to Americans bringing back large sums of money from overseas via money orders or traveler’s checks.
