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I am a U.S. citizen, residing in Spain, who sold a property last summer in Washington DC. Where do I pay the capital gains tax? In the U.S. or in Spain? Or both (with a credit for tax paid to the country with the lower rate applied to the country with the higher rate)? And finally, do I also have to pay the capital gains tax to Washington DC? (Obviously, I am not a resident of DC).

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As a US citizen you're taxed in the US on your worldwide income. You're also taxed in Spain. Check the tax treaty for specific conditions and avoiding double taxation, and what forms and how you should file in Spain. The US has the priority in this case since that's where the property is located.

Real estate is usually taxed by the jurisdiction in which it is located first. I.e.: even if you were not a US tax resident, you'd be taxed by the US for this transaction, but probably with higher taxation rates.

And yes, you're also taxed by DC, for the same reason, but for DC you may be taxed as a "non-resident". Check the DC laws, physical residency and tax residency may differ so it's not at all obvious. Tax treaties usually do not apply to State taxes, but not sure how DC is treated for tax treaties, you should probably consult with a Spanish tax professional (you may end up being double taxed due to the DC tax).

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  • following up on this after having finished my federal taxes using TurboTax. Strangely, TT insists that I don't have to file DC taxes because I am a non-resident. The only way to have TT calculate DC taxes is if I change my data and pretend to have lived in DC. Additionally, see See #44 of FAQs that is specifically about a non-resident taxpayer. Still searching for a definitive answer re Wash DC taxes on capital gains
    – punkish
    May 24 at 18:44
  • @punkish It's not just any capital gains, it's specifically real-estate capital gains (there's a difference). I don't know if DC taxes those for non-residents or not, I suggest you talk to a tax adviser who practices in DC.
    – littleadv
    May 24 at 18:55
  • thanks. As it happens, I did talk to a tax adviser practicing in DC (hard to find one from remote) and she basically declined to help since I've already done my federal taxes. So I need to look for another. Yes, I realize that real-estate capgains are different from stocks capgains. But please see the FAQ I linked in the comment above. I will also try and call the Office of Tax and Revenue, DC, and ask them directly.
    – punkish
    May 25 at 7:46

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