6 ms·

What if your assets are less than $2 million?

by immigrantheart 4y ago

sgjohnson 4y ago
Then it’s probably not worth to renounce the US citizenship, and you’d be shooting yourself in the foot if you did.
- immigrantheart 4y ago
  How so? You can retire comfortably today in SEA countries with $2 million in bank account.
  - sgjohnson 4y ago
    Why renounce the US citizenship, if you’re retiring? There’s only one benefit from renouncing the US citizenship. You’re no longer a tax resident. There’s also a $112k+inflation/year exemption for foreign earned income for non-residents. https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion https://www.irs.gov/individuals/international-taxpayers/fore... So if you’re renouncing your citizenship for tax reasons, it’s very unlikely that it’s going to be worth it, if you’ve got under $2m in assets. Not to mention that if you decide to return to the US, not only have to go through the US immigation system, but you also won’t clear a background check, because people who renounce their US citizenship are entered into the NICS system.
  - nullc 4y ago
    But what would the LTCG be on those assets? At most $2m * 15% = 300k (assuming you were able to realize it over several years and avoid the 20% LTCG bracket and 3.8% NIIT), cheaper to pay the taxes than buy a passport and you would preserve your ability to return to the US if you found it in your interest.
- javert 4y ago
  There are moral and practical arguments for renouncing US citizenship. It's not just about saving on taxes.
  - sgjohnson 4y ago
    > practical arguments Such as? All of them stem from FATCA, and we’re back to taxes. And in a lot of situations not even renouncing the US citizenship will help you there, as you’ll be scrutinized for having a US birthplace.
    - FooBarBizBazz 4y ago
      >> practical arguments > Such as? All of them stem from FATCA, and we’re back to taxes. I understand that FATCA's reporting requirements are onerous enough for banks that they reject US account holders. Then, the inability to get a local bank account may cause problems. This is where I ask, "can't you just use a US bank account, then? One with good international support? (No fees, etc.)" I suspect this is feasible in many countries? I do know, however, that in India, many activities require an Indian credit card (regular Visa &etc cards work fine for many things, but for others -- particularly if they touch the government in any way -- they are rejected). And the way to get an Indian credit card is to have an Indian bank account. You see where this is going. So e.g., you end up unable to buy train tickets without bugging an Indian citizen to do it for you. I would also suspect that, the minute you need to deal with an account with any kind of special government classification -- say, a retirement account -- then you need that account to be at an institution that knows about those laws, which again would require a local bank.
      - jen20 4y ago
        There isn’t even a US bank that functions well in the US, let alone abroad. Absolutely nothing like Monzo available (until Monzo itself becomes more broadly available…)
- jhugo 4y ago
  Really? US citizenship is a huge liability because of global taxation. If you have the opportunity to exchange it for another, and you don't want to live in the US, it seems like a no-brainer.
- brobinson 4y ago
  If you live in another country and make over $112,000 USD (2022 number) there, you're paying US taxes on the difference even with the Foreign Earned Income Exclusion. That sucks a lot for a lot of Americans.
  - sgjohnson 4y ago
    What’s the top federal income tax bracket? 37%? In most high-income countries with that income, you either won’t pay anything, or the difference will be marginal. There will be very few people in the world for whom renouncing the US citizenship would be worth it long-term. Unless you go full tax-haven, which is also fine.
    - deleted 4y ago
      [deleted]
    - brobinson 4y ago
      What do you mean by, "you won't pay anything"? The issue is that you pay taxes to _two_ countries on the same income because you can't shield the income from the US above the foreign earned income exclusion amount. Sorry if I'm misunderstanding you.
      - sgjohnson 4y ago
        You pay only the difference. There’s also an exemption on taxes already paid to a different country.
        brobinson 4y ago
        Yes, I mentioned the FEIE in the first post you replied to. Wealthy/high income Americans renounce their citizenships to avoid being double taxed if they don't live in the US because the FEIE has a cap and they are double taxed on the remainder.

What if your assets are less than $2 million?

sgjohnson 4y ago

Then it’s probably not worth to renounce the US citizenship, and you’d be shooting yourself in the foot if you did.

immigrantheart 4y ago
How so? You can retire comfortably today in SEA countries with $2 million in bank account.
- sgjohnson 4y ago
  Why renounce the US citizenship, if you’re retiring? There’s only one benefit from renouncing the US citizenship. You’re no longer a tax resident. There’s also a $112k+inflation/year exemption for foreign earned income for non-residents. https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion https://www.irs.gov/individuals/international-taxpayers/fore... So if you’re renouncing your citizenship for tax reasons, it’s very unlikely that it’s going to be worth it, if you’ve got under $2m in assets. Not to mention that if you decide to return to the US, not only have to go through the US immigation system, but you also won’t clear a background check, because people who renounce their US citizenship are entered into the NICS system.
- nullc 4y ago
  But what would the LTCG be on those assets? At most $2m * 15% = 300k (assuming you were able to realize it over several years and avoid the 20% LTCG bracket and 3.8% NIIT), cheaper to pay the taxes than buy a passport and you would preserve your ability to return to the US if you found it in your interest.
javert 4y ago
There are moral and practical arguments for renouncing US citizenship. It's not just about saving on taxes.
- sgjohnson 4y ago
  > practical arguments Such as? All of them stem from FATCA, and we’re back to taxes. And in a lot of situations not even renouncing the US citizenship will help you there, as you’ll be scrutinized for having a US birthplace.
  - FooBarBizBazz 4y ago
    >> practical arguments > Such as? All of them stem from FATCA, and we’re back to taxes. I understand that FATCA's reporting requirements are onerous enough for banks that they reject US account holders. Then, the inability to get a local bank account may cause problems. This is where I ask, "can't you just use a US bank account, then? One with good international support? (No fees, etc.)" I suspect this is feasible in many countries? I do know, however, that in India, many activities require an Indian credit card (regular Visa &etc cards work fine for many things, but for others -- particularly if they touch the government in any way -- they are rejected). And the way to get an Indian credit card is to have an Indian bank account. You see where this is going. So e.g., you end up unable to buy train tickets without bugging an Indian citizen to do it for you. I would also suspect that, the minute you need to deal with an account with any kind of special government classification -- say, a retirement account -- then you need that account to be at an institution that knows about those laws, which again would require a local bank.
    - jen20 4y ago
      There isn’t even a US bank that functions well in the US, let alone abroad. Absolutely nothing like Monzo available (until Monzo itself becomes more broadly available…)
jhugo 4y ago
Really? US citizenship is a huge liability because of global taxation. If you have the opportunity to exchange it for another, and you don't want to live in the US, it seems like a no-brainer.
brobinson 4y ago
If you live in another country and make over $112,000 USD (2022 number) there, you're paying US taxes on the difference even with the Foreign Earned Income Exclusion. That sucks a lot for a lot of Americans.
- sgjohnson 4y ago
  What’s the top federal income tax bracket? 37%? In most high-income countries with that income, you either won’t pay anything, or the difference will be marginal. There will be very few people in the world for whom renouncing the US citizenship would be worth it long-term. Unless you go full tax-haven, which is also fine.
  - deleted 4y ago
    [deleted]
  - brobinson 4y ago
    What do you mean by, "you won't pay anything"? The issue is that you pay taxes to _two_ countries on the same income because you can't shield the income from the US above the foreign earned income exclusion amount. Sorry if I'm misunderstanding you.
    - sgjohnson 4y ago
      You pay only the difference. There’s also an exemption on taxes already paid to a different country.
      - brobinson 4y ago
        Yes, I mentioned the FEIE in the first post you replied to. Wealthy/high income Americans renounce their citizenships to avoid being double taxed if they don't live in the US because the FEIE has a cap and they are double taxed on the remainder.