3% US interest rate worth more than 6% Philippines rate

@mugtech

my ending balance is worth less than $10,000, my original investment.  In addition I would be paying $55 in income taxes, adding to the loss.

When figuring your US capital gains taxes your basis would have been $10K in US dollars. Even though you may have gained in Pesos, US taxes use the dollar figure so you would have shown a loss in dollars. In that case you would not declare any capital gain so the tax woyld be zero dollars. Right, the problem with investing here in dollars is the current rising dollar rate; you have two investments one being currency speculation and the other being the investment itself which in your example is less gain than the currency exchange loss. You would have to pay Philippine capital gains however but not knowing the investment type, I don't know the %. If it were real estate, your CG tax would be 6% assuming you, not the buyer, agreed to pay it.

Maybe Someone here can give me some information on capital gains in the Philippines. So my wife and I paid 10 million pesos initially for our 3 bedroom ocean front house in Argao (S Cebu). That was five years ago. Two years ago, we spent 3 million pesos to repair the damage caused by hurricane Odette. We also spent another 2 million pesos in upgrades, 1 million pesos in furnishings and 1 million pesos for a solar system including upgrades to the roof. We plan on selling the house in another 5 to 10 years and anticipate getting anywhere from 17 to 21,000,000 pesos for it at that time. When we sell it, can we deduct the money we spent on damages and upgrades including the solar package from any capital gains?

Maybe Someone here can give me some information on capital gains in the Philippines. So my wife and I paid 10 million pesos initially for our 3 bedroom ocean front house in Argao (S Cebu). That was five years ago. Two years ago, we spent 3 million pesos to repair the damage caused by hurricane Odette. We also spent another 2 million pesos in upgrades, 1 million pesos in furnishings and 1 million pesos for a solar system including upgrades to the roof. We plan on selling the house in another 5 to 10 years and anticipate getting anywhere from 17 to 21,000,000 pesos for it at that time. When we sell it, can we deduct the money we spent on damages and upgrades including the solar package from any capital gains? - @Morgacj200424

As we have understood it, "capital gains" here for real estate for tax purposes is totally different than it is in the US. Here it is very strange; at least in Negros Oriental and Siquijor provinces, the attorney will draft and notarize 2 different deeds of sale. There will be the real one for say, 20M and then there will be one for tax purposes, usually about half or 10M. This apparently is customary, not illegal. Your capital gains tax in this case has nothing to do with a cost basis of what you  paid initially and for improvements and losses against selling price like they do in the US. It is simply 6% of the selling price, period, in this case .06*10M pesos or 600K php. Also, it is customary to negotiate which party pays the CG tax, either buyer or seller. In one of our experiences there was a slight deviation to this. For our lot, BIR apparently thought that, based on the lot location, 50% of the selling price was still too low to be used as a base for taxes and they gave us a higher tax bill than 6% of the 50%, I guess basing it on recent sales. I cannot say for sure if this same CG procedure is used in Cebu province; do you remember how it was computed when you initially bought the Argao property?

Importantly, when you sell, in addition to Phils "capital gains" you will have US capital gains. Everything will have to be computed manually for IRS as you will not receive the various irs forms that occur in the US during real estate sales. In that case I had to closely follow instructions and figure my US CG from formulas that included pension income, taxable SS income, cost basis (amount paid for land), amount sold, currency conversion to dollars at buying and selling rates (treasury has a publication for this) and when the final bill is computed, you subtract what you paid to Phils BIR.

Now, in the event of a tax audit, good luck in explaining to the IRS auditor how you have 2 notarized deeds of sale with different selling prices, especially when you research on Google it and it only mentions the 6% *of what was paid*  no 50% anywhere. I just kept all official records knowing that they should be happy knowing that the 50% deed of sale actually reduces the foreign tax credit you are deducting from the US CG tax amount.

I gave a little more info than you asked for haha but hope you can see the complexities.

Not worried about an audit especially since Trump one! Lol  thanks for the info very complicated indeed. I will most likely consult a tax attorney If and when I sell.

@mugtech
my ending balance is worth less than $10,000, my original investment. In addition I would be paying $55 in income taxes, adding to the loss.
When figuring your US capital gains taxes your basis would have been $10K in US dollars. Even though you may have gained in Pesos, US taxes use the dollar figure so you would have shown a loss in dollars. In that case you would not declare any capital gain so the tax woyld be zero dollars. Right, the problem with investing here in dollars is the current rising dollar rate; you have two investments one being currency speculation and the other being the investment itself which in your example is less gain than the currency exchange loss. You would have to pay Philippine capital gains however but not knowing the investment type, I don't know the %. If it were real estate, your CG tax would be 6% assuming you, not the buyer, agreed to pay it. - @danfinn

This is based on cd,s.  I would have to declare the 33,000 pesos as interest income on my US tax return.  Not sure how I would claim the loss on the value of the pesos.  The point is that it does not pay to invest in pesos instead of dollars.  This has been true since 1945 when the exchange rate was 2 pesos to the US dollar.

@Morgacj200424

I will most likely consult a tax attorney If and when I sell.

I am sure they must exist but it is possible to read the IRS material and do it correctly yourself. It just may take some time to go through the learning curve (depending on your background) which I found rather interesting. I saw that some of these paid tax services charged $450 just to do a simple 1040 tax return so I figured it was best to do it myself.

@mugtech

I would have to declare the 33,000 pesos as interest income on my US tax return.

OK, yeah I missed the interest income which you would have to declare using the exchange rate on the day you signed the return.