Home purchase and tax impacts (US)

[douglasxwilliams]

Hello all...

I am new to this forum, but I have been reading the newsletters and watching the YouTube videos. All have been great.

One thing I am trying to learn and research about is concerning purchasing a home in Japan. I was wondering if anyone has info or thoughts/suggestions regarding any potential US tax impact. I am working full time now, but planning on retiring in 3 to 5 years, so the idea of not paying rent forever sounds good to me. However, if the tax penalty or any other impact is large, then maybe it is okay to continue renting. (?) I have been trying to read through the US IRS info, but it is quite difficult to comprehend.

thank you for any help, questions, thoughts!

[captainspoke]

Tax impact? What would that be?

I doubt you'll get the mortgage deduction (not sure), but what else are you worried about? It sounds like you're going to live there (not sell), and houses/land generally don't appreciate here unless you're lucky, so likely never any gain on a sale (or not much).

[douglasxwilliams]

Tax impact? What would that be?

I doubt you'll get the mortgage deduction (not sure), but what else are you worried about? It sounds like you're going to live there (not sell), and houses/land generally don't appreciate here unless you're lucky, so likely never any gain on a sale (or not much).

I thought that there might be some sort of tax for purchasing the property. From what you wrote, it sounds like i need to re-read the information i found. And, yes, my plan would be to live in the house (primary, and only residence), not for investment purposes.

thank you for the reply!

[Beaglehound]

Tax impact? What would that be?

I doubt you'll get the mortgage deduction (not sure), but what else are you worried about? It sounds like you're going to live there (not sell), and houses/land generally don't appreciate here unless you're lucky, so likely never any gain on a sale (or not much).

I thought that there might be some sort of tax for purchasing the property. From what you wrote, it sounds like i need to re-read the information i found. And, yes, my plan would be to live in the house (primary, and only residence), not for investment purposes.

thank you for the reply!

There will be various taxes on the Japanese side, but I can’t imagine purchasing property here would attract taxes in the US.

[TokyoWart]

There are no US tax impacts for the home purchase itself, even if it is overseas. A house is also not a reported asset for FBAR for US citizens. You can take the mortgage interest deduction (most people don't because it's unusual for it to exceed your standard deduction but I did for several years while I had the mortgage) but you are supposed to also go through a complicated calculation on whether or not you have a phantom gain due to exchange rate movements and that can add to your US taxes although I for one never knew about this rule while I had a mortgage in Japan and even my (former IRS CPA) accountant never brought it up. You also have the same exemption on capital gains for sale of your primary residence you would have if the home were located in the US as long as you live in the home at least 2/5 years immediately before sale.

[Gulliver]

but planning on retiring in 3 to 5 years,

Be careful, you may be getting too old to qualify for mortgage. Many Japanese banks require that you are able to pay off the loan by the time you are 75. So, for example, if you get a 35 year mortgage you’d have to sign the paperwork when you are 40.

Age discrimination laws are not a thing here.

[douglasxwilliams]

Thank you for that info too. Yes, I noticed that about age issues here.

[HawaiianBrian]

but planning on retiring in 3 to 5 years,

Be careful, you may be getting too old to qualify for mortgage. Many Japanese banks require that you are able to pay off the loan by the time you are 75. So, for example, if you get a 35 year mortgage you’d have to sign the paperwork when you are 40.

Age discrimination laws are not a thing here.

So, just curious, say you’re 55. You can put down a higher amount and/or get a 15 year mortgage?

[beanhead]

So, just curious, say you’re 55. You can put down a higher amount and/or get a 15 year mortgage?

Yes, exactly. As long as the bank agrees. You may have to shop around and keep an open mind. Try local banks and net-banks as well as the big three.