Make Your Big Money Moves Before You Move Abroad
Why Selling Your U.S. Home After Relocating Could Cost You Big
At Big Cake Tax, we see it far too often: a client holds onto their U.S. home while moving abroad, thinking “I’ll sell it later, once I’m settled.” But what they don’t realize is that their new country of tax residency may tax the entire gain from that sale—even if the U.S. wouldn’t.
This mistake can cost you tens of thousands, if not more.
U.S. Tax Law Is Generous. Most Other Countries Aren’t.
Under IRC Section 121, the IRS allows you to exclude:
$250,000 of gain (single filers), or
$500,000 (married filing jointly)
...from the sale of your primary residence, as long as you lived there for 2 out of the last 5 years before selling.
If you’re still a U.S. tax resident, that’s a huge benefit.
But here’s the problem:
Once you establish tax residency in another country, that country usually has full taxing rights over your global income—including capital gains on your U.S. home. And most countries don’t recognize the U.S. home sale exclusion.
Featured Example: France Hits Hard
Let’s say you're a single filer who bought a home in the U.S. for $260,000 and sold it for $500,000 after living there for several years. That’s a $240,000 gain—well within the U.S. exclusion. So if you sell before moving, your U.S. tax bill is $0.
But if you sell after becoming a tax resident in France?
France taxes your worldwide income, and they:
Don’t honor the U.S. exclusion,
Tax 100% of the gain (not just part of it),
Apply a combined rate of up to 36.2%, including social surtaxes.
So your $240,000 tax-free gain in the U.S. could now result in an $86,880 tax bill in France.
This is not theoretical—it’s a well-documented problem. This guide from Sanderling Expat Tax offers a great breakdown of how France applies these rules to Americans.
This Doesn’t Just Happen in France
France may be one of the worst offenders, but it’s not alone. Other countries with aggressive tax rules on foreign real estate gains include:
Spain – Up to 28% capital gains tax, plus harsh penalties for failing to declare your foreign property.
Italy – Flat 26% capital gains tax, with no U.S. home exclusion.
Germany – Will tax the gain unless you’ve owned the property for 10+ years.
Portugal – Taxes 50% of the gain at marginal rates (28–48%), and the U.S. exclusion doesn’t apply.
The details differ, but the risk is the same:
Once you become a tax resident abroad, your “U.S.-only” tax planning is no longer enough.
The #1 Rule: Do Your Homework Before You Move
It’s not just about where you live. It’s about where you’re tax resident—and the day you cross that threshold, your new country may claim taxing rights on things you assumed were off-limits.
That includes:
Selling your U.S. home,
Cashing out stock options,
Triggering deferred compensation,
Large retirement account withdrawals.
Tax residency isn't just a status—it's a trigger. And once pulled, there’s often no going back.
Bottom Line: Plan the Big Money Moves Before the Big Move
If you’re planning to move abroad and still own a U.S. home, the smartest play is often to:
Sell the home before you establish tax residency elsewhere, and
Lock in your U.S. capital gains exclusion while it still applies.
Otherwise, that “maybe I’ll sell later” approach could leave you with a five- or six-figure tax bill you never saw coming.
Need a Strategy Before You Move?
We specialize in helping clients align their financial plans before relocating abroad—so they don’t get blindsided by foreign tax traps.
Book a consultation and let’s make sure your move is smart, strategic, and fully tax-optimized.