We live in Panama and want to sell our residence. We do not have a residence in the US... My husband thinks since it is our only residence we will not have to pay capital gains. Is this true? What if we bought a small home in the US before selling the Panama home.. how does that affect things?

Capital gains in the USA or in Panama?

Further, are you U.S. citizens?

Yes, sorry I forgot to indicate that..

Capital gains in the US is what I was interested in but in Panama as well...

I cannot comment on Panama, but for the United States, no capital gains tax is due if the house was your primary home for at least two of the last five years. It is exempt from taxation on the profit of the sale for up to $500,000.

So, if you sold the house for less than $500,000, you do not even have to report the sale.

Selling a home in Panama will not cause any capital gains taxes in the USA, why would it? Are you a citizen of Panama and do you pay taxes there or in the USA

Ballengerb1:

The sale of the house, if NOT the primary home, WOULD cause capital gains tax in the USA if saidebird is a U.S. citizen, because ALL world-wide income for U.S. citizens is subject to U.S. taxation.

I understand but all the OP has stated is they live in Panama. Waiting to hear more about citizenship and where they pay taxes. Also sounds like this is their one and only home so its likely the primary. Sadiebird, are you going to fill in the blanks

1. A U.S. citizen or resident must report worldwide income even when he or she does not live in the U.S. If you paid taxes in the foreign country, you will claim credit for taxes paid in the foreign country by filing Form 1116 or can file form 2555 Foreign Earned Income Exclusion.

2. If you owned your main home for two years and lived for two years in past five years, then you can exclude gain of up to $250,000. If you are eligible to exclude the gain, you do not report it on the tax return. Your main home can be in a foreign country.