Plans To Retire Abroad? Here's What You Need To Know!
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| Picture Courtesy: www.pixabay.com Bilbao, Spain Train Station |
We have pre- and post-immigration planning services available for clients planning to move for work or retire outside the United States. Many move because they believe their retirement dollars stretch further, some move for the warmer climates and many move back to their birth countries to be closer to family. Immigration planning helps the taxpayer understand the tax implications of moving abroad and planning for it.
1. Continue Filing Taxes in the US: First thing to remember about retiring overseas that the United States has a Citizenship-Based-Taxation regime or CBT, so your US tax filing obligations do not stop just because you moved abroad. The income to be declared on your US tax return should include your world-wide income. Your filing deadline maybe June 15th or April 15th depending on the category on income you have. All foreign bank accounts with highest balances over $10,000 should also be declared via Form 114. More about that in my blog post here.
2. Retirement Income From the U.S: You might have various sources of income from the United States including but not restricted to Rental Income, Interest, Dividends, Pensions, IRA Distributions etc. You will have to make arrangements so you will have access to your income even though you are not a resident of the United States. These funds will have to be repatriated to your country of residence. If you have reached qualifying age, you can also apply for and receive Social Security Benefits. More information about receiving Social Security benefits while living abroad is on the SSA website, it is a tool that helps you figure out what your eligibility is.
3. Getting Back To Work While Abroad: Let's say you are one of those lucky people who gets a second shot at working after you move abroad, and you are paid a salary. You may be eligible for the Foreign Earned Income Exclusion {FEIE}. There is a primer on this topic here on my blog. You may be able to exclude some or all of your foreign earned income from being taxed by the U.S. The 2019 FEIE amount is $105,900 which means you will be able to exclude the first $105,900 from being taxed in the U.S.
4. Tax Treaty Provisions Or Double Tax Avoidance Agreements: The United States has entered into Tax Treaties with many countries around the world. This means that if you live in a country which has a tax treaty with the U.S. you may be able to take advantage of it's provisions and avoid double taxation by both countries on the same income. Under these treaty provisions, you may be able to take credit for taxes paid in either country. Some countries have Totalization Agreements with the United States and that helps you to also avoid taxation of your Social Security benefits earned in either country.
5. Filing State Taxes: Sometimes, the U.S. State where you had residence before you moved abroad may still require you to file tax returns. This is especially true if you have rental properties in certain states in the U.S. Many U.S. states do not recognize Tax Treaties or offer foreign tax credit. You may have to establish residence in a non-taxing U.S. state tax before moving abroad.
6. Some Challenges Moving Abroad: From the many, many online forums for Expat Americans and many expat clients, we have learnt that the Foreign Accounts Tax Compliance Act {FATCA, more in my blog post here} has caused them a lot of headaches in conducting their business with financial institutions in their countries of residence. Many financial institutions, brokerage firms, and retirement fund administrators in the United States do not allow online access from outside the country. This double whammy for a lot of people who move abroad is definitely a huge challenge. Navigating these hurdles requires knowledgeable support in the United States while you live abroad.
7. Relinquishing Your U.S. Citizenship or Surrendering Your Green Card: The challenges in dealing with one's financial life in 2 countries causes many expats to take drastic steps to relinquish their citizenship or surrender their Green Cards. More details in my blog post here. This is indeed a huge step and one must not to try to do this on their own.
Moving abroad is a huge endeavor and one must make sure they have worked out a plan with their tax adviser before they undertake this. Till then happy travelling folks, may you satisfy your wanderlust and find a dream retirement home if you are looking!
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Consult with a Circular 230 Tax Professional for your unique tax needs. Please read my disclaimer here. If you have any questions regarding this issue or other tax matters, all of my contact information is on my website, www.mntaxbiz.com.
2. Retirement Income From the U.S: You might have various sources of income from the United States including but not restricted to Rental Income, Interest, Dividends, Pensions, IRA Distributions etc. You will have to make arrangements so you will have access to your income even though you are not a resident of the United States. These funds will have to be repatriated to your country of residence. If you have reached qualifying age, you can also apply for and receive Social Security Benefits. More information about receiving Social Security benefits while living abroad is on the SSA website, it is a tool that helps you figure out what your eligibility is.
3. Getting Back To Work While Abroad: Let's say you are one of those lucky people who gets a second shot at working after you move abroad, and you are paid a salary. You may be eligible for the Foreign Earned Income Exclusion {FEIE}. There is a primer on this topic here on my blog. You may be able to exclude some or all of your foreign earned income from being taxed by the U.S. The 2019 FEIE amount is $105,900 which means you will be able to exclude the first $105,900 from being taxed in the U.S.
4. Tax Treaty Provisions Or Double Tax Avoidance Agreements: The United States has entered into Tax Treaties with many countries around the world. This means that if you live in a country which has a tax treaty with the U.S. you may be able to take advantage of it's provisions and avoid double taxation by both countries on the same income. Under these treaty provisions, you may be able to take credit for taxes paid in either country. Some countries have Totalization Agreements with the United States and that helps you to also avoid taxation of your Social Security benefits earned in either country.
5. Filing State Taxes: Sometimes, the U.S. State where you had residence before you moved abroad may still require you to file tax returns. This is especially true if you have rental properties in certain states in the U.S. Many U.S. states do not recognize Tax Treaties or offer foreign tax credit. You may have to establish residence in a non-taxing U.S. state tax before moving abroad.
6. Some Challenges Moving Abroad: From the many, many online forums for Expat Americans and many expat clients, we have learnt that the Foreign Accounts Tax Compliance Act {FATCA, more in my blog post here} has caused them a lot of headaches in conducting their business with financial institutions in their countries of residence. Many financial institutions, brokerage firms, and retirement fund administrators in the United States do not allow online access from outside the country. This double whammy for a lot of people who move abroad is definitely a huge challenge. Navigating these hurdles requires knowledgeable support in the United States while you live abroad.
7. Relinquishing Your U.S. Citizenship or Surrendering Your Green Card: The challenges in dealing with one's financial life in 2 countries causes many expats to take drastic steps to relinquish their citizenship or surrender their Green Cards. More details in my blog post here. This is indeed a huge step and one must not to try to do this on their own.
Moving abroad is a huge endeavor and one must make sure they have worked out a plan with their tax adviser before they undertake this. Till then happy travelling folks, may you satisfy your wanderlust and find a dream retirement home if you are looking!
---
Consult with a Circular 230 Tax Professional for your unique tax needs. Please read my disclaimer here. If you have any questions regarding this issue or other tax matters, all of my contact information is on my website, www.mntaxbiz.com.
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