Could someone help me?
I have property rental income in the US. This time for 2014 is less than 2500pounds, but in future maybe a little bit more than that.
So I am wondering which country's tax I should pay?
Thank you in advance.
Replies (5)
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Possibly both
The answer to this will depend on your tax residence status, your domicile and (in the US) your citizenship.
As far as the UK is concerned, if you are a UK tax resident then you are taxable here on your worldwide income which would of course include the US rents. However, if you are not domiciled in the UK then you may possibly exclude this income from UK taxation by using the remittance basis as long as the money has not been brought UK.
As far as the US is concerned, my understanding is that you will of course pay local taxes (our equivalent to property rates) and you may pay state taxes too. Whether you pay federal taxes will, I believe, depend upon whether you are a US citizen or not. To be sure you would need to speak to a US tax expert.
If you do pay state or federal taxes in the US and you are still liable to pay tax in the UK, as described above then you would normally be able to obtain a credit for the US tax paid.
The US accountant who advised you sounds confused. As this is income from US real property you will need to apply for and obtain an ITIN, decide if you wish to claim the "net election" and file annual US income tax returns.
Other countries such as the UK might give you credit for US tax payable.
I suggest you take professional advice.