Buying house in Japan with money from home sale...newbie questions.

[solo7100]

Questions:

1. How long have you been living in Japan in the last 10 years?
2. Have you claimed any Depreciation on the Property in Japan over the years?
3. Does it still count as a Loss if you calculate Sale Price - (Purchase Price - Depreciation) - Costs ?

If the answer to 3. is yes, then no capital gains tax. Just send the money.
If the answer to 3. is No, but but the answer to 1. is less than 5 years, sell the property this year, but don't send the money to Japan until next year, then no capital gains tax in the year the money is remitted to Japan.

You should speak to an accountant just to make sure you are not exposing yourself to other tax liabilities at the same time, as mentioned by Beaglehound... These will depend on your actual total circumstances.

1. 7 years this summer.

2. I don't own the house, mom does. So I guess there was no need to claim depreciation since it is not connected to me....I think?

3. Wow, your #3 helps me understand how to calculate loss or gain. Will have to figure that out if the choice is to sell. Thank you.

Agreed about talking to an accountant. If and when we get there I will engage the services of one.

Thanks so much.

OK, so it's not your house... In that case, the Capital Gain question is not relevant.

If your mother sells the house and sends you the money, then Gift Tax.

If you inherit, then Inheritance Tax.

That makes sense now, thanks much.

[Beaglehound]

There are a couple of options to soften the tax blow, which may apply to your situation. Not sure how/if they apply with your mother being non tax resident in Japan though.

Since the house belongs to your mother I think she can sell it, then gift you up to 25m tax free with the proviso that this will eventually be included in any inheritance tax calculation. My wife and her father used this for the land on which we built our house. The benefit of this is that inheritance tax deductions are far greater than gift tax ones.

There is/was(?) also a system whereby parents can gift up to a certain amount for their descendants to use for property, although age limits apply IIRC. My memory of this is sketchy but others will be more on the ball hopefully.

[Tkydon]

There are a couple of options to soften the tax blow, which may apply to your situation. Not sure how/if they apply with your mother being non tax resident in Japan though.

Since the house belongs to your mother I think she can sell it, then gift you up to 25m tax free with the proviso that this will eventually be included in any inheritance tax calculation. My wife and her father used this for the land on which we built our house. The benefit of this is that inheritance tax deductions are far greater than gift tax ones.

There is/was(?) also a system whereby parents can gift up to a certain amount for their descendants to use for property, although age limits apply IIRC. My memory of this is sketchy but others will be more on the ball hopefully.

I believe the Gift Tax Exemption for the acquisition of residential property was terminated at the end of 2021.

https://taxsummaries.pwc.com/japan/indi ... ther-taxes
See the Right Hand Side of the Gift Tax Rates Table

The Gift Tax rate levied on a Lineal Recipient (Son, etc.) is lower that that of non-lineal recipients:

Total Gifts in Year minus Basic Gift Allowance Y1.1M

10% on first Y2M, 15% on second Y2M, 20% on third Y2M, 30% on next Y4M, etc.

(as opposed to, for non-lineal recipients:
10% on first Y2M, 15% on second Y1M, 20% on third Y1M, 40% on next Y4M, etc.)


Or, as Beaglehound said, you can elect the Unified Gift / Inheritance Tax System, locking in the value for Inheritance Tax purposes as the value of the Gift at the time of the Gift...

[solo7100]

Ok, thanks so much for all the info.

[solo7100]

Ok, so I have some updates about this situation. The housing market in my home country is super super hot right now, so our timeline of making decisions has greatly accelerated. I've re-read all of your responses...but still am foggy about a few things.

Questions:
1. What if my mother sold the house, put the monies in her account, then transferred the money into my account (all in the US...so her US bank to my US bank). I let it sit there for a few days/months (?), then wire the monies to myself here in Japan.
---> my understanding is that as far as Japan goes and as far as they know, I am transferring my own money in the US to myself here in Japan. Would they know or have to know where I got all that money? Maybe it was my savings for the past 20 years or a lottery win or a transfer of money from a parent. In other words, what difference would it make where I got the money in my own country if it's ultimately in my account at the time of transferring "my" money to myself?

2. Failing #1, if my mom was a resident here in Japan with a valid working visa or religious or any other visa beside temp, could she flat out buy a house with HER own money that she transfers to herself from the US bank to her Japanese bank (when she sets up one)? Of course, then when she goes the way of the earth (I'm old school), the house would be transferred to my name which I'm sure would incur other types of taxes (inheritance, etc)?

3. There were a number of responses above about inheritance taxes, gift taxes, exemptions, law changes, percentage every year, etc. Dude, I'm not sure about all of that, but considering #1 and #2, would any of those things you all mentioned apply here?

Thanks so much, super thankful,

[solo7100]

Understood, what kind of resource would be recommend to seek counsel from:

- real estate agent
- finance person / banker
- tax office

?

Thanks,

[Beaglehound]

Ok, so I have some updates about this situation. The housing market in my home country is super super hot right now, so our timeline of making decisions has greatly accelerated. I've re-read all of your responses...but still am foggy about a few things.

Questions:
1. What if my mother sold the house, put the monies in her account, then transferred the money into my account (all in the US...so her US bank to my US bank). I let it sit there for a few days/months (?), then wire the monies to myself here in Japan.
---> my understanding is that as far as Japan goes and as far as they know, I am transferring my own money in the US to myself here in Japan. Would they know or have to know where I got all that money? Maybe it was my savings for the past 20 years or a lottery win or a transfer of money from a parent. In other words, what difference would it make where I got the money in my own country if it's ultimately in my account at the time of transferring "my" money to myself?

2. Failing #1, if my mom was a resident here in Japan with a valid working visa or religious or any other visa beside temp, could she flat out buy a house with HER own money that she transfers to herself from the US bank to her Japanese bank (when she sets up one)? Of course, then when she goes the way of the earth (I'm old school), the house would be transferred to my name which I'm sure would incur other types of taxes (inheritance, etc)?

3. There were a number of responses above about inheritance taxes, gift taxes, exemptions, law changes, percentage every year, etc. Dude, I'm not sure about all of that, but considering #1 and #2, would any of those things you all mentioned apply here?

Thanks so much, super thankful,

If you do #1, you would be knowingly evading gift tax. Sure, the authorities may not get wind but I would be very uncomfortable doing that in your situation. Besides it’s not necessary as
#2 is all above board, and as you say would attract inheritance tax at the time of your mother’s passing. And inheritance tax is much less ‘punitive’ than gift tax.

[solo7100]

Ok, so I have some updates about this situation. The housing market in my home country is super super hot right now, so our timeline of making decisions has greatly accelerated. I've re-read all of your responses...but still am foggy about a few things.

Questions:
1. What if my mother sold the house, put the monies in her account, then transferred the money into my account (all in the US...so her US bank to my US bank). I let it sit there for a few days/months (?), then wire the monies to myself here in Japan.
---> my understanding is that as far as Japan goes and as far as they know, I am transferring my own money in the US to myself here in Japan. Would they know or have to know where I got all that money? Maybe it was my savings for the past 20 years or a lottery win or a transfer of money from a parent. In other words, what difference would it make where I got the money in my own country if it's ultimately in my account at the time of transferring "my" money to myself?

2. Failing #1, if my mom was a resident here in Japan with a valid working visa or religious or any other visa beside temp, could she flat out buy a house with HER own money that she transfers to herself from the US bank to her Japanese bank (when she sets up one)? Of course, then when she goes the way of the earth (I'm old school), the house would be transferred to my name which I'm sure would incur other types of taxes (inheritance, etc)?

3. There were a number of responses above about inheritance taxes, gift taxes, exemptions, law changes, percentage every year, etc. Dude, I'm not sure about all of that, but considering #1 and #2, would any of those things you all mentioned apply here?

Thanks so much, super thankful,

If you do #1, you would be knowingly evading gift tax. Sure, the authorities may not get wind but I would be very uncomfortable doing that in your situation. Besides it’s not necessary as
#2 is all above board, and as you say would attract inheritance tax at the time of your mother’s passing. And inheritance tax is much less ‘punitive’ than gift tax.

So in other words #2 is the way to go? No taxes involved if she purchased the house in her name? Then, when passing time comes and it passes to me, I would have to pay inheritance tax (whatever that % is)? We're just trying to see how to keep as much of the house sale monies as possible when bringing it here and using it for residential purposes.

[Deep Blue]

2. Failing #1, if my mom was a resident here in Japan with a valid working visa or religious or any other visa beside temp, could she flat out buy a house with HER own money that she transfers to herself from the US bank to her Japanese bank (when she sets up one)? Of course, then when she goes the way of the earth (I'm old school), the house would be transferred to my name which I'm sure would incur other types of taxes (inheritance, etc)?

Your mum wouldn't need to be a resident of Japan to buy a house here. It's pefectly doable as a non-resident - I purchased the house I now live while being non-resident in Japan.. even with a mortgage at the time. If your Mum can buy with cash, so much the easier.

[Beaglehound]

Ok, so I have some updates about this situation. The housing market in my home country is super super hot right now, so our timeline of making decisions has greatly accelerated. I've re-read all of your responses...but still am foggy about a few things.

Questions:
1. What if my mother sold the house, put the monies in her account, then transferred the money into my account (all in the US...so her US bank to my US bank). I let it sit there for a few days/months (?), then wire the monies to myself here in Japan.
---> my understanding is that as far as Japan goes and as far as they know, I am transferring my own money in the US to myself here in Japan. Would they know or have to know where I got all that money? Maybe it was my savings for the past 20 years or a lottery win or a transfer of money from a parent. In other words, what difference would it make where I got the money in my own country if it's ultimately in my account at the time of transferring "my" money to myself?

2. Failing #1, if my mom was a resident here in Japan with a valid working visa or religious or any other visa beside temp, could she flat out buy a house with HER own money that she transfers to herself from the US bank to her Japanese bank (when she sets up one)? Of course, then when she goes the way of the earth (I'm old school), the house would be transferred to my name which I'm sure would incur other types of taxes (inheritance, etc)?

3. There were a number of responses above about inheritance taxes, gift taxes, exemptions, law changes, percentage every year, etc. Dude, I'm not sure about all of that, but considering #1 and #2, would any of those things you all mentioned apply here?

Thanks so much, super thankful,

If you do #1, you would be knowingly evading gift tax. Sure, the authorities may not get wind but I would be very uncomfortable doing that in your situation. Besides it’s not necessary as
#2 is all above board, and as you say would attract inheritance tax at the time of your mother’s passing. And inheritance tax is much less ‘punitive’ than gift tax.

So in other words #2 is the way to go? No taxes involved if she purchased the house in her name? Then, when passing time comes and it passes to me, I would have to pay inheritance tax (whatever that % is)? We're just trying to see how to keep as much of the house sale monies as possible when bringing it here and using it for residential purposes.

Yes, as long as the US house is sold before your mother is a resident here in Japan there would be no Japanese tax due until inheritance in your #2 scenario I believe.