Moving to the United States and becoming a U.S. tax resident can be a complex process, with many tax considerations that need to be taken into account. Whether you are a foreign national considering a move to the U.S. for work, study, or to start a business, or you are a U.S. citizen or legal permanent resident returning to the U.S. after living abroad, it is important to understand the U.S. tax system and how it may affect you.
One of the most important tax considerations when moving to the U.S. is determining your residency status. The U.S. tax system is based on a system of worldwide taxation, which means that U.S. citizens and legal permanent residents (also known as green card holders) are subject to U.S. taxes on their worldwide income, regardless of where they reside. Foreign nationals, on the other hand, are generally only subject to U.S. taxes on their U.S. source income, unless they become U.S. residents, in which they will be liable for U.S. taxes on their worldwide income.
The most common test used to determine residency status is the substantial presence test. Under this test, you will be considered a U.S. tax resident if you were present in the U.S. for at least 31 days during the current calendar year and 183 days during the three-year period that includes the current year and the two years immediately preceding it. The 183 days are calculated by counting all the days present in the current year, 1/3 of the days present in the first preceding year, and 1/6 of the days present in the second preceding year.
However, there are also other tests that may apply, such as the green card test, which applies to legal permanent residents, and the first-year choice test, which applies to certain foreign students and scholars. Additionally, you may be able to claim a tax treaty benefit, which can help to reduce or eliminate your U.S. tax liability.
It is important to note that the U.S. has a different tax year and filing deadline than other countries, which may require you to file multiple tax returns if you have income from both U.S. and foreign sources. Additionally, you may be required to file additional forms, such as the Foreign Bank and Financial Accounts (FBAR) form, if you have foreign bank accounts or other foreign assets.
Another important tax consideration when moving to the U.S. is the tax treatment of your foreign assets. Under U.S. tax law, U.S. residents and citizens are required to report their foreign assets on their U.S. tax return, including bank accounts, stocks, bonds, mutual funds, real estate, and other assets, like foreign corporations, partnerships, and trusts. This includes assets that you may have owned prior to becoming a U.S. resident or citizen.
Additionally, you may be subject to U.S. tax on the capital gains from the sale of foreign assets. This can be a significant tax liability and it is important to plan accordingly.
Finally, it is important to keep in mind that the U.S. tax system is subject to change and that tax laws and regulations are often complex and subject to interpretation. to ensure that you are complying with all relevant tax laws and regulations.
Don’t navigate the complex U.S. tax system alone, contact our firm today to schedule a consultation with one of our experienced tax advisors. We can help you understand your tax obligations and develop a plan to minimize your tax liability. Contact us now to ensure that your move to the U.S. goes smoothly and tax efficiently.
We recommend the following resources to learn more about your U.S. tax obligations as a U.S. resident: