US house sale

[us_tax_noob]

Hi there,

My wife and I have owned and resided in a house in the US since June 2021. I am Canadian, my wife is neither Canadian nor a US citizen (we have US citizen kids though). We are planning to move to a third country and rent out the house before selling it in about 3 years (before June 2028).

I am aware of the 2 out of 5 years rule to claim exclusions on up to $500K capital gains on primary residence sale if married filing jointly. However, at the time of selling the house (June 2028) we will not be US residents, which means we need to file 1040-NR and there is no option to do married filing jointly, but will meet the 2 out of 5 years criteria.

Couple of questions:
1. Is there a way to take advantage of the exclusion on capital gain when selling the house (assuming we meet the 2 out of 5 years primary residence criteria)? based on this link it sounds like each one needs to file 1040-NR and claim up to $250K portion of the capital gain https://christopherbyrne.com/nonresiden ... exclusion/

How does this work?

2. Does both of us need to be on the title/sale documents to claim the cap gain exclusion? we were thinking of doing a quitclaim deed so that I will be only on the title (easier for coming back to the US and selling house etc)

3. Assuming we can use the exclusion, what to do to avoid FIRPTA withholding at time of sale? does each one of us need to do separate thing?

4. If I put the house under a trust, would any of this change?

I am trying to think about these scenarios to make sure I have everything is in place to make this process easy.

Thanks!

[nelsona]

As to the exclusion, since you will both be reporting half the sale, you each get 1/2 of the exclusion. I would not put it solely in your name (why do you think this would make it easier later?)

[us_tax_noob]

Want to put it in my name as my wife may have visa issues if she needs to re-enter the us when we sell the house. We want to reduce this risk.

[nelsona]

She can sell from anywhere in the world.

[us_tax_noob]

Thanks for replying, nelsona. I assume you mean she can e-sign documents? another option I can think of is to have financial power of attorney. Not sure how all of this would work if we create a trust for the house.

Regarding the other questions, how to avoid FIRPTA withholding at time of sale?

thanks!

[nelsona]

https://www.irs.gov/individuals/interna ... ithholding