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The Alleged Tax

Two years ago, my wife (US Citizen) and I (Permanent Resident) bought and moved into a house in Colorado (Greeley, Weld County). At closing, we were just about to put both our names on the paperwork, when our realtor told us that "a non-citizen will have to pay a tax", and that it would be ... I don't remember if she said 20% or 10%, but high. Either way, more than we could afford, and we were signing, pens in hand, so only my wife's name went on the deed and we thought we could always change it later. (I did some googling after to try and find out more about this tax, couldn't find anything, then we had a baby and forgot about it.)

Now we are moving to another city (Pueblo West, Pueblo County), selling this house and buying another, and I have been trying to find what this tax is and how much it would be, as I would like to be on the deed jointly.

Colorado's Non-Residency Tax

I cannot find evidence this tax actually exists. The closest I have found is a Colorado State tax for non-Colorado residents. (https://mountain-living.com/blog/not-living-in-colorado-will-cost-you-2-more-when-you-sell-your-vacation-home/) But I am a Colorado resident, and that tax is for selling a home, we were buying. (Although now we are doing both).

I'm wondering if our previous realtor misremembered badly? It was a sudden "oh, you're aware of this, right?" kind of thing verbally, at the signing; not something formal or in writing. Or was she right, and there is a huge tax I/we'd have to pay, and I just can't find it online? I have been through about a dozen Google pages of various search terms, and searched on StackExchange.

Other Details

I am a LPR (conditions still on card), British origin, have a SSN, and my wife and I file taxes jointly, although I do not have any income myself. This and the new house would both be our primary residencies, and are still in CO.

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    I doubt there is such a tax, but: when you sell the house, the IRS can withhold up to 30% of the sale price to make sure you file and pay your taxes for the potential gains (instead of leaving the country with it). Your tax obligation from the sale might well end up as zero, but it is very cumbersome to be out of a huge chunk of the sale price until the year after (as you can only file taxes once the year is complete). Look into that to be sure about your situation and risk.
    – Aganju
    Commented Oct 31, 2020 at 5:19
  • @Aganju Are you referring to normal Capital Gains tax (which applies if sold within two years, 0% up to about 80K, then 15-20% on profit over 80K)? Or to a special rule specifically for foreigners? If so would that apply to selling our current house as only my wife is the legal owner? If you can link me relevant IRS pages that would be very appreciated. Thanks for your comment. (Luckily, we'd be able to survive having 30% withheld a year, as we are moving to a much cheaper home). Commented Oct 31, 2020 at 7:39
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    Rob, FWIW as you suspect it sounds nonsensical. Never heard of such a thing.
    – Fattie
    Commented Oct 31, 2020 at 14:31
  • @Aganju+ the 30%-or-treaty withholding is for a nonresident alien (NRA) on FDAP and capital gains that are not real property or 'effectively connected'. NRA real property sale is withheld at 10% or 15% of the price (not gain). But LPR is classified as resident and taxed exactly the same as a citizen. Rob note: if your cap gain is not excludable, it is taxed at the brackets that apply after your non-cap-gain (ordinary) income, so the figures you give apply only if you and your wife have zero taxable ordinary income, which would be rare. Commented Nov 1, 2020 at 2:11
  • Note that illustrates why you need your own lawyer in a real estate purchase. The seller's lawyer is not responsible for protecting your interests.
    – keshlam
    Commented Sep 21, 2023 at 19:01

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