We used a home equity loan in the US to finance the construction of a home in Mexico. When we sold the US house in 2007 the income was used to pay off the mortgage and home equity. There was almost nothing left over. We are interested in selling our house in Mexico and returning to the US. We purchased our present Mexican house for $200,000 and hope to sell it for over $250,000. We have lived in this house for two years. We have made approximately $10,000 in improvements. What will we owe in taxes when we have the money transferred to the US bank account?

Assuming you are U.S. citizens AND the Mexico house was your PRIMARY home, you will owe NOTHING on taxes. In fact, you do not even have to report the sale.

If you owned the house and lived in it for two years in last 5 years, you can exclude gain of up to $250,000.