My client lives and is a citizen of England. She wishes to purchase a secondary home in Georgia. My question is what would her taxes be as a temporary resident of the US? Is there anything else that I could do for her? I have already advised her to speak with a Real Estate lawyer.
david ingram replies:
I do not see any Canadian tie in here, Great Britain but not Canada but that is okay.
In general, if she is a non-resident of the US and this is a vacation home and she is in the US less than 183 days in any year she has no income tax liability to the US or Georgia other than on any income she receives if she were to invest other monies in the US.
With regard to the house, if and when she sells it, she will be subject to both Georgia and Federal tax on any capital gain.
If she happens to spend more than 120 days a year for three years in a row or 150 days one year and 120 the next, she will also fall within the substantial prescence test rule of the US.
In this case, they take the days that she is present in the US ths year - let's say 140 and add 1/3 of the 150 days she was there the year before and 1/6th of the days she was there two years before. If this adds up to more than 183, she must file a form 1040 or a 1040NR plus an 8840 to prove that she has a closer connection to another country.
You can see that if a person is there for
2008 150 days 150
2007 90 days x's 1/3 30
2006 120 days x's 1/6th 20
for a total of 200 days which now requires forms 1040NR and 8840 to be filed.
Suggest that she goto www.centa.com and read the April 1994 newsletter in the top left hand box. This 13 year old newsletter makes the point that this is not new.
And, of course, if she is there for moe than 183 days in any one year whe is taxable in the USA on her world income and will file Federal Form 1040 and Georgia form 500
CEN-TA Cross Border Services - Tax, Visas, Immigration