A home brought for $150,000 or less in the DR, a USA citizen does not pay taxes?

live_for_life

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I saw on HGTV here in the USA if a USA citizen buys a home in the DR for $150,000 or less, he or she does pay taxes on that home to the DR government. Does he or she have to pay capital gain taxes to the USA government on that property or does capital gain taxes just apply to homes brought in the DR used for rental property income like Charles Rangel the congressman in New York fail to pay taxes on? I guess if the home is one's primary residence in the Dominican Republic then the USA government cannot legal obligate pay one pay yearly taxes on it.
 

Hillbilly

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live_for_life: That does not make sense.

However, if you are filing income taxes in the US, you do need to declare any income from overseas property. I believe in Charlie Rangel's case he rented the property out but did not declare the income.

Now, if you buy a house here and do not claim any of the expenses or any of the income, it does not seem likely that Uncle Sam will come looking for you. Uncle Leonel does not tell Uncle Sam that you bought a house here, so he won't know you did.

If you are renting the house out, you might have to file income taxes in the DR, however.

HB
 

AlterEgo

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As far as the other part of the question, I was told that a home costing under 5 million DOP [roughly US$150,000] does not incur property tax. Houses over that amount pay 1 or 2% annually, can't remember which. I was also advised that houses in the campo are exempt - not sure if that is true.

AE
 

AndyGriffith

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It's actually about $135,000 now as per $RD37 to $1 USD. 10 years ago the RD$5 million exemption would even cover houses, but now it barely covers apartments. As they have not adjusted the exemption up to RD$10 to $RD15 million as a result of the devaluation of the peso, the result is that eventually all properties in time are going to fall out of the exemption and be paying the 1% tax.
 
Jan 17, 2009
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If I were you, I'd research it further by talking to a tax attorney or accountant in the US. AFAIK you (or eventually your heirs) will sell the property and capital gains apply--same as if the property were located in the US.
 

AndyGriffith

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I saw on HGTV here in the USA if a USA citizen buys a home in the DR for $150,000 or less, he or she does pay taxes on that home to the DR government. Does he or she have to pay capital gain taxes to the USA government on that property or does capital gain taxes just apply to homes brought in the DR used for rental property income like Charles Rangel the congressman in New York fail to pay taxes on? I guess if the home is one's primary residence in the Dominican Republic then the USA government cannot legal obligate pay one pay yearly taxes on it.

What yearly taxes would be due to the U.S. if it is a primary residence? According to U.S. Tax law, if you derive income from said property then you must include it in your tax filing. U.S. Citizens and Residents are taxed on a citizenship basis and not on a territorial or residence basis. The sale of the property could net capital gains or it could also net capital loss on its liquidation. Gains would also be taxable as long as you are a U.S. Citizen or Resident. The question you need to ask yourself is about the reporting of said income and gains. How is such information reported from country A to country B.
 

live_for_life

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live_for_life: That does not make sense.

However, if you are filing income taxes in the US, you do need to declare any income from overseas property.

If I am lucky enough to land a job in the Dominican Republic, I wonder if I have to file a USA tax return on that income? Jobs in the Dominican Republic do not give USA citizens W-2 forms to file taxes in the USA for what I am able to derive.
 

Chip

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If I am lucky enough to land a job in the Dominican Republic, I wonder if I have to file a USA tax return on that income? Jobs in the Dominican Republic do not give USA citizens W-2 forms to file taxes in the USA for what I am able to derive.

Get the job first before worrying about the W-2. :)

At any rate W-2 is something that's used in the States and therefore unless you work at the American embassy or something this is no concern.
 

live_for_life

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Get the job first before worrying about the W-2. :)

At any rate W-2 is something that's used in the States and therefore unless you work at the American embassy or something this is no concern.

I am excited about moving to the Dominican Republic (DR). I am going to work in the USA for about 8 more months then come back to the DR. I had a job offer the last time I was in Santo Domingo.
 
E

engineerfg

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PS - This is opinion and not advice, but many people think just because they're in a third world country that doesn't keep track, then they can easily get away with evasion. Essentially they feel 'security by obscurity' works for them.

Over the long term however, even this country's taxes will eventually get computerized and information sharing will become more prevalent with uncle Sam.

At that point, the light will shine on all the cockroaches who evade their taxes, and they're all ****ed.

A better strategy instead of evasion, is to consider avoidance. There are plenty of legitimate avoidance techniques that will save you reasonable tax. For example does the house need to be in your name? Can you lend it to a local company? or to a trust in turks and caicos? put a family member that you trust etc etc.

bottom line, yes evasion will save you the most tax, but avoidance is legal and you can save lots of tax too, and sleep comfortable at night knowing that if/when the data sharing in this country is fixed, you're not screwed.
 

AndyGriffith

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PS - This is opinion and not advice, but many people think just because they're in a third world country that doesn't keep track, then they can easily get away with evasion. Essentially they feel 'security by obscurity' works for them.

Over the long term however, even this country's taxes will eventually get computerized and information sharing will become more prevalent with uncle Sam.

At that point, the light will shine on all the cockroaches who evade their taxes, and they're all ****ed.

A better strategy instead of evasion, is to consider avoidance. There are plenty of legitimate avoidance techniques that will save you reasonable tax. For example does the house need to be in your name? Can you lend it to a local company? or to a trust in turks and caicos? put a family member that you trust etc etc.

bottom line, yes evasion will save you the most tax, but avoidance is legal and you can save lots of tax too, and sleep comfortable at night knowing that if/when the data sharing in this country is fixed, you're not screwed.

"No man in this country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or to his property as to enable the Inland Revenue to put the largest possible shovel into his stores.”
British Judge Lord Clyde in Ayrshire Pullman Motor Services v. the Commissioner of Inland Revenue

“Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible.”
U.S. Judge Learned Hand - U. S. Court of Appeals

Does the Dominican Republic have a tax information sharing agreement with the United States?
 
Last edited:
Jan 17, 2009
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If I am lucky enough to land a job in the Dominican Republic, I wonder if I have to file a USA tax return on that income? Jobs in the Dominican Republic do not give USA citizens W-2 forms to file taxes in the USA for what I am able to derive.

File your taxes! The exemption for living abroad is over $90K; so it's unlikely then that you'll owe anything. And depending on which state you live in now, make sure you close all your affairs with the state; including returning your drivers license and voter registration.
 

AlterEgo

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We all know that Charlie Rangel got into a lot of legal and political trouble because he didn't pay taxes on the money he received on his DR rental property.

Does anyone know HOW he was caught??

AE
 

greydread

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Jan 3, 2007
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We all know that Charlie Rangel got into a lot of legal and political trouble because he didn't pay taxes on the money he received on his DR rental property.

Does anyone know HOW he was caught??

AE

All Federal Officials above a certain pay grade and elected or appointed Officials must fill out an SF-278, Financial Public Disclosure form. This is an annual requirement.

The problem comes in when someone takes the time to match up these public disclosure forms with an individual's tax return. Most of the U.S. Congress members would have a devil of a time explaining the differences between the two documents. It usually only happens when someone is out to get you. How many people actually go over every line of their professionally prepared tax forms. Most people just look at the last line on each form.

Office of Government Ethics - SF-278 Form
 

Keith R

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Correct. Therefore, what tax information is collected in DR to share with other governments?

From the IRS Manual:
5.21.2.2.1 (02-17-2009)
Types of Exchange of Information

1. The types of information that may be exchanged under an Exchange of Information include but are not limited to:
A. Tax returns and return information such as verification of filing status, citizenship, residency, income, expenses and tax liability,
B. Third party information return filings,
C. Bank records,
D. Business records,
E. Public records such as deeds, birth, death and marriage records, and
F. Witness interviews.