Leaving or Coming to the U.S.
In anticipation of a move to the U.S., tax planning is extremely important.
The U.S. taxes its residents (including citizens) on a worldwide basis. The tax assessment can apply to income and gains that accrued outside the U.S. and prior to the foreign national’s arrival in the U.S. Simply recognizing a gain while a resident of the U.S. will trigger the tax, irrespective of where or when the gain accrued (foreign tax credits may provide relief).
The U.S. gift and estate tax rules also apply to foreign nationals living in the U.S. These rates go as high as 40% of the value of the property transferred by gift or bequest. IRS liens also often prevent the property from being transferred prior to the payment of tax. We can help you achieve significant savings by recognizing gains and completing gifts prior to a move to the U.S. Similarly, we can assist with estate plans to provide relief from the estate taxes.
Termination of U.S. residency requires careful planning.
First of all, it is important to make sure that U.S. citizens and U.S. green card holders formally terminate their citizenship or permanent residence status if their goal is to break U.S. tax residency. If not, the individual will continue to be taxed as a U.S. resident even though he/she now lives abroad.
Once the individual’s immigration status is formally addressed, it will then be important to review the so called substantial presence test to determine a U.S. residency termination date.
It is equally important to consider the likelihood of future visits to the U.S. Careful planning is necessary to prevent future visits (although temporary) from triggering the so-called “anti-lapse rule” with the result being continued U.S. residency.
These rules are complex and require careful planning. We have helped many global clients navigate through the rules around U.S. residency.
To contact Christopher J. Byrne PLLC