1. Under the Eligibility Test, if you have both owned and lived in your home for at least two of the last five years, then you are eligible to exclude a gain of up to $250,000 ($500,000 for married taxpayers) from tax
  2. If you don’t meet the Eligibility Test, you may still qualify for a partial exclusion of gain. You can meet the requirements for a partial exclusion if the main reason for your home sale was a change in workplace location, a health issue, or an unforeseeable event.
  3. If you have not both owned and lived in the home for at least two out of the last five years, or you had gain above the exclusion, then the gain will be taxed at capital gain rate and reported on Schedule D of your tax return.
  4. The gain is considered foreign source income and is eligible for Foreign Tax Credit,  meaning: all foreign taxes paid on the gain will reduce your US tax
  5. To calculate the gain, each transaction such as the purchase price, renovation cost and any expenses, need to be reported in dollars, using the foreign currency exchange rate on the date of the transaction, and not on the sale date.
  6. If there is a mortgage on the house, then any gain from the foreign currency exchange rate conversion, when the mortgage is paid off, is separately reported as ordinary income.
  7. Since the currency exchange loss (or gain) from the payoff of the mortgage is considered personal, any loss is not deductible.