One would not normally think that the US could impose taxes on a home that was sold in London, especially when the home was sold by the Mayor of London. However, this is exactly what happened late last year.
Originally, London Mayer Boris Johnson said that he would not be paying the tax lien that was placed on him by the United States, but earlier this year changed his mind. Now, reports say that he plans to pay the fee just before he takes a planned trip to the Boston area.
But, now, the question remains, why is he required to pay these taxes in the first place? That question lies in the origin of his birth and the citizenships that he currently holds. Johnson was actually born in New York and currently holds both a British citizenship as well as an American citizenship as well.
Due to this citizenship, he is also required to follow the tax laws in the United States as well. The specific law that comes into play during this situation is the one that requires citizens to pay taxes on income that they earn around the world, regardless of where they live at the time that it is earned.
This meant that Johnson was required to pay taxes when he sold his first home last year. Naturally, he received a bill from the US Internal Revenue Service at this time. In Britain, there were no taxes owed for the proceeds made from selling a main residence, but this is not the case in the United States.
The US actually levies a capital gains tax on these types of incomes. There is also a law in place that requires US citizens who have foreign earnings of greater than $97,600 to pay taxes on this amount as well.
Naturally, Johnson was very frustrated when he received the bill and stated that he shouldn’t be required to pay it because he hadn’t lived in the United States since he was five years old. However, he now has decided to pay the bill so that he is able to renounce his US citizenship. The exact amount of the lien is unknown, but it is estimated to be around $44,000.
Johnson is one of the most popular politicians in Britain and is considered to be the best candidate to take the seat of Prime Minister over David Cameron if the Conservative Party happens to lose the election when May rolls around.
Although he has said in the past that his US citizenship is “very difficult to give up”, paying the lien will give him that opportunity. Even though this is not a requirement in order to be eligible to run for Prime Minister, this may be something that is preferable if he is looking to advance his political career. Hopefully, this instance will help inform people about how important it is to learn about the laws in the countries that they have a citizenship from.
