I have a green card. Do I pay U.S. tax when I sell my home in China?

You report it, because green card holders and citizens are taxed on worldwide income. If you owned and lived in the home as your main home for 2 of the 5 years before the sale, §121 excludes up to $250,000 of gain, or $500,000 on a joint return.

Which exchange rate do I use for a China home sale?

Convert the purchase price, each improvement and the sale price at the rate on the date each occurred, then compute the gain. The IRS requires individuals whose functional currency is the dollar to translate foreign-currency items at the rate prevailing when received or paid.

Can I credit the Chinese tax I paid on the sale?

Chinese individual income tax is an income tax and can be claimed on Form 1116, generally converted at the payment-date rate. VAT and stamp duty are not creditable but the seller's share counts as a selling expense. Tax on gain excluded under §121 usually can't be used that year but may carry over.

Is it taxable to wire the sale proceeds to the U.S.?

No. Moving your own money is not income. But while the proceeds sit in a Chinese account, the FBAR is required if all foreign accounts together exceed $10,000 at any time, and Form 8938 may be required if your foreign financial assets exceed its thresholds.

I moved to the U.S. a few years ago. Can I still exclude the gain on my old home in China?

If you lived there at least 24 months during the 5 years before the sale, yes. Time after you moved out, within that 5-year window, is not nonqualified use, so a sale within about 3 years of moving often qualifies. Years when parents lived there or it was rented don't count as your use.

Selling a Home in China: U.S. Tax Guide

The short answer

U.S. citizens, green card holders and other U.S. tax residents who sell a home in China report the gain on their U.S. return, because the U.S. taxes worldwide income. If you owned the home and lived in it as your main home for at least 2 of the 5 years before the sale, §121 lets you exclude up to $250,000 of gain ($500,000 married filing jointly). The gain is measured in dollars: convert the purchase price at the exchange rate on the purchase date and the sale price at the rate on the sale date. Chinese income tax on the sale can be claimed as a foreign tax credit on Form 1116. Moving the proceeds to the U.S. is not taxable in itself, but the Chinese accounts may need to be reported on the FBAR and Form 8938.

Who this applies to

New immigrants and green card holders who kept a home in China. Once you are a U.S. tax resident, the sale is reportable.

Owners of a home their parents live in. If you haven't lived there for years, the exclusion usually doesn't apply.

Families selling a former rental in China. Rental periods and depreciation affect the exclusion.

RTP employees selling in China to buy in the U.S., where timing and the transfer of funds need planning.

People still in the immigration process. A sale before you become a U.S. tax resident is generally outside U.S. tax, so timing matters.

The §121 home sale exclusion

Own the home for 24 months and use it as your main home for 24 months within the 5 years before the sale, and you can exclude $250,000 of gain, or $500,000 on a joint return.

The tests: both look back 5 years from the closing date. The 24 months need not be continuous; 730 days in total is enough. On a joint return, only one spouse must meet the ownership test, but both must meet the use test to get $500,000.

Location doesn't matter: §121 looks at your principal residence, with no requirement that it be in the U.S.

Selling after moving to the U.S.: time after you move out of your main home, within the 5-year window, is not "nonqualified use." A family that lived in its home until moving to the U.S. in mid-2023 and sells in 2026 will often still pass the 2-of-5-year tests.

When the exclusion is limited: periods after 2008 when the home was not your main home, such as rental years, can reduce the exclusion proportionally, and depreciation taken while renting can't be excluded. You generally can't use the exclusion twice within 2 years.

Reporting: if the whole gain is excluded and you received no Form 1099-S, you generally don't report the sale. Taxable gain goes on Form 8949 and Schedule D. Chinese sales don't produce a 1099-S, but taxable gain must still be reported.

Cost basis and exchange rates

Convert the purchase price, each improvement and the sale price at the rate on the date each occurred, then compute the gain. Currency moves change your dollar gain.

The IRS rule: amounts on a U.S. return must be in dollars, and an individual whose functional currency is the dollar translates foreign-currency items at the exchange rate prevailing when they are received or paid.

Basis includes the purchase price, purchase taxes you paid as the buyer (such as deed tax), and later improvements at their own payment-date rates, minus any depreciation taken while it was rented.

Selling expenses: agent and legal fees, and transfer-type taxes paid as the seller, reduce the amount realized. They are not separately deductible.

Two sets of books: a gain in RMB can shrink, disappear or grow once converted to dollars. A loss on a personal home is not deductible.

RMB mortgages: if you financed the home with an RMB loan and the RMB weakened before you repaid it, repaying may produce a currency gain in dollar terms. Section 988's foreign currency rules generally don't apply to personal transactions (§988(e)), but whether such a gain must be reported and how to measure it needs case-by-case review. Currency losses tied to a personal home are generally not deductible.

Chinese tax and the foreign tax credit

Chinese individual income tax on the sale is creditable; other taxes generally count only as selling expenses.

Creditable: the individual income tax is an income tax, claimed on Form 1116 and generally translated at the exchange rate on the date paid. Article 12 of the U.S.–China treaty lets China tax gains on real property located in China, and Article 22 has the U.S. allow a credit under U.S. law.

Not creditable: VAT and surcharges, stamp duty and similar charges are not income taxes; the seller's share counts as a selling expense.

Excluded gain leaves nothing to offset: gain excluded under §121 bears no U.S. tax, so the related Chinese tax usually can't be used that year. It can carry back 1 year and forward 10 under the usual rules.

Chinese exemptions: China offers income tax relief in some situations; if no Chinese tax is paid, there is nothing to credit.

Net investment income tax: gain above the exclusion may also face the 3.8% NIIT, which the foreign tax credit generally does not offset, so it needs its own calculation.

Moving the money: FBAR and Form 8938

Transferring your own money from China to the U.S. is not income and is not taxed. What matters is reporting the Chinese accounts.

FBAR: if the proceeds sit in a Chinese bank account and all your foreign accounts together exceed $10,000 at any time during the year, file FinCEN Form 114, due April 15 with an automatic extension to October 15.

Form 8938: a single filer living in the U.S. files when foreign financial assets exceed $50,000 at year-end or $75,000 at any time ($100,000 / $150,000 joint). Foreign real estate held directly isn't reported on the FBAR or 8938, but the cash from the sale is.

Keep the paperwork: purchase and sale contracts, invoices, tax receipts and wire records support your basis and gain and answer U.S. bank questions about the source of funds.

If parents paid or gave the money: large gifts from foreign individuals may require Form 3520; see our gift reporting guide.

A simple example

Simplified. Exchange rates are assumed, and NIIT, state tax and the Chinese tax computation are ignored.

Mr. Li bought a home in Nanjing in 2012 for RMB 2,000,000. At an assumed rate of 6.3, his basis is about $317,460. His family moved to the U.S. in 2016 and his parents lived in the home. In 2026 he sells it for RMB 3,000,000; at an assumed 7.1 and after RMB 60,000 of selling costs, the amount realized is about $414,085.

His dollar gain is about $414,085 − $317,460 ≈ $96,600, while in RMB the gain is 940,000. Because he hasn't lived there since 2016, he fails the 2-of-5-year use test and can't use §121. The long-term capital gain goes on Form 8949 and Schedule D.

Any Chinese individual income tax he paid on the sale is translated at the payment-date rate and claimed on Form 1116. Wiring the proceeds to the U.S. is not taxed, but the Chinese account holding them must be checked against the FBAR and Form 8938 thresholds.

Common mistakes

"The house is in China and China taxed it, so the U.S. doesn't need to know." Citizens and green card holders report worldwide income; Chinese income tax is handled through the credit.

"Compute the gain in RMB, then convert at the sale-date rate." Purchase and sale amounts are converted separately at their own dates.

"It's my house, so I get $250,000." The test is 2 years of your own use in the last 5; years when parents lived there, or it was rented or empty, don't count.

"Wiring the money to the U.S. is taxable." The transfer isn't, but the accounts may need FBAR and 8938 reporting.

"VAT and stamp duty reduce my U.S. tax." Only income taxes are creditable; other charges are selling expenses.

What to do and when

Before the sale: find the purchase contract, invoices and improvement receipts, look up exchange rates for each date, and count your days of use in the last 5 years.

At signing and transfer: keep the price, each tax and fee, and tax receipts, with dates.

December 31, 2026: note the highest and year-end balances of your Chinese accounts for the FBAR and 8938 tests.

April 15, 2027: 2026 Form 1040 (with Form 8949, Schedule D and Form 1116) and the FBAR are due. The FBAR extends automatically to October 15, and the return can be extended to October 15.

How YCL can help

We rebuild your basis and gain in dollars using the rates on each date, apply the §121 exclusion and nonqualified-use rules, and claim Chinese income tax on Form 1116.

Before the money comes to the U.S., we review the FBAR, Form 8938 and any gift reporting so nothing is missed. See Foreign property sale.

For the full process, see our guide: U.S. tax on selling a home in China. Related: FBAR and Form 8938.

YCL Accounting & Consulting is a multi-state CPA firm serving clients across the U.S. in English and Chinese, led by co-founder Gloria (Chenchen) Liu, CPA. You can start with a free 15-minute consultation.