Are you planning for retirement in the United States? Are you renouncing your citizenship? Don’t you know anything about US taxes and FATCA? Don’t worry, and we will discuss here everything about the advantages of renouncing your US citizenship. For more details, click here and get yourself updated with the latest information that you should know before renouncing your citizenship.
Advantages of retiring and renouncing in the United States with ease
With the mounting frustration over FATCA and US taxes, it is not at all hard to know why several US expats are deciding to renounce US citizenship. And while it might be a surprising thing to few people, the US does not punish you at all to revoke or even renounce the privileges you earned during your time as a citizen. You may renounce your citizenship and eliminate future US taxes and still get the advantages and income from the United States from which you are titled.
Advantages of Renouncing US Citizenship
You don’t have to liquidate your assets and investments in the US if you renounce:
Once you renounce your United States citizenship, you are known as an NRA or non-resident alien. So, if you have any financial activity on assets or investment in the United States, then you have to report on form 1040NR instead of the form 1040 that you were filing previously.
If you have any investment that you retain in the United States account, they are treated as:
- You may get a year-end statement listing all of your dividends, investment, and capital gains.
- You have to notify all the brokerage houses and bank accounts of your new status by filing the W-8CE form.
- The cost basis of any bonds, stocks, mutual funds, or other capital assets might now be the value as of the day prior to your renunciation.
- Your tax rates for different items might be dependent on the country in which you are a resident. Also, you have to check the tax treaty of that country with the United States.
- You have to file for 1040NR for any income you get from US sources.
- Business-related income is also taxed using the tax tables offered by the IRS. It is similar to brackets and tax rates as form 1040.
- Your tax rates for different items might be dependent on the country in which you reside.
- Non-business income might be taxed at 30 percent unless the tax treaty states it.
Non-covered expatriates have no instant US tax liability.
To completely appreciate the advantages of renouncing US citizenship, you should file form 8854 with your income tax return to know if you are a non-covered expatriate or a covered expatriate. A covered expatriate is one who is subjected to an exit tax. In this way, IRS makes sure that you are not renouncing your citizenship to eliminate a hefty tax payment. They want their money to be paid before you go. To be considered a Non-covered expatriate and so exempt from the exit tax, the following needs should be met:
- You should file taxes for the five years preceding the year that you renounce your citizenship.
- If you don’t have dual citizenship, you should meet the necessary criteria along with the things mentioned above.
- Your net worth, which includes real property and retirement accounts both outside and inside the United States, should not be more than $2 million on the date you renounce your citizenship.
- Your average annual net income tax liability should not exceed 2021, $1,72,000
- You may gift up to $1,65,000 in 2022 to an NR alien spouse every year without any need to pay a gift tax in USA. If you have something owned jointly with your NR or non-resident alien spouse, then it will be added to your net worth at 50 percent of the balance
- You should have renounced your citizenship in the year in which you may fill out form 8854
- Suppose you are born a dual citizen and are taxed as a resident of the other country, such as the UK. If you are born in the UK and now staying in the country and paying taxes there, you cannot have lived in the United States for more than 10 of the previous 15 years.
If you are a covered expatriate, you have to pay an exit tax depending on your deemed gain on items you have, such as stocks, partnerships, real property, bonds, and others. Any deferred compensation plans that you have are taxed in one of the two ways, you have to elect to have received a full payout the day before your renunciation and are taxed as per form 1040, or you may prefer to forego any tax treaty benefit on these things, and the distributions might be taxed at 30 percent when you prefer to cash them out. Also, make sure that after your renunciation, you have US tax filing needs, and if you have financial assets, investments, and hold properties located in the United States of America, then you have to file tax.
Social Security advantages are generally available to those who qualify:
There are particular US social security laws for NRAs, so it is crucial to know the rules and reality. But, in general, if you have paid your social security for a full 40 quarters, you become eligible to gather advantages when you retire.
As an NRA, you may continue to gather US social security if you wish to remain a citizen of the US. Also, there are many things that impact. US bilateral agreements, your country of residence, or your recent citizenship.
Varying on these aspects, you have to get a minor tax adjustment, or you have to pay your payments discounted after you stay outside the country for six months.
But, even if this happens and your payments are discontinued, then you have to return to the US for one month from midnight to midnight and every six months to continue your payment. For instance, if you are a citizen of one of the countries listed here, you might continue to get payments as you are outside the country unless you get paid as a survivor or dependent. In such a scenario, SSA needs you to meet additional needs.
The countries are Barbuda and Antigua, San Marino 7, Colombia, Belize, Argentina, Belize, Bahama Islands, Barbados, Dominican Republic, Iceland, Hungary, Bosnia Herzegovina, Brazil, Burkina Faso, Iceland, Ecuador, Bulgaria, Costa Rica, Croatia, Lithuania, Macedonia, Jordan, Cote d’Ivoire, Cyprus, Dominica, Gabon, El Salvador, Malta, Palau, Peru, Mexico, Latvia, Panama, Romania, Phillippines, Micronesia, Liechtenstein, Guyana, Guatemala, Nicaragua, Montenegro, Jamaica, Marshall Islands, Venezuela, Turkey, Uruguay, Trinidad-Tobago, Fed states of Montenegro, Monaco, St Kitts and Nevis, Serbia, Slovenia, Slovakia, St. Vincent and the Grenadines, St. Lucia.
Those who renounce or revoke their United States of America citizenship but are not a citizen of one of the countries listed might stop getting payments after they start living outside the US for six months unless particular expectations are met. One of the best ways several US expats retain their eligibility is residence. If you are a resident of one of these famous expat countries, then you will get your payments regularly that are France, Austria, Canada, Australia, Chile, Belgium, Finland, Czech Republic, Germany, Greece, Ireland, Denmark, Italy, South Korea, Japan, Norway, Spain, Luxembourg, Poland, Netherlands, Portugal, Switzerland, Sweden, United Kingdom.
You should note that there are a few countries to which social security cannot make payments, including Turkmenistan, Cuba, Ukraine, North Korea, Uzbekistan, Azerbaijan, Vietnam, Belarus, Moldova, Georgia, Tajikistan, Kazakhstan, Turkmenistan, and Kyrgyzstan. Only citizens of the US may accumulate unpaid payments. NRAs lose these payments completely.
Conclusion on How to Renounce US Citizenship
In this blog, we learned the Benefits of revoking or renouncing US citizenship. It does not mean that you have to give up your retirement perks or the income that you have worked hard for. It is necessary to be aware and educate yourself on the impact of your revoke or renunciation to make sure that you know the immediate tax implications and long-term income tax filing needs you might still have if you prefer to leave the property in the United States of America. But overall, the news is good for US expats who wish to turn in their passports and live a retired life in their country or the country they have planned. So, in this article, we have discussed different benefits related to revoking your citizenship and things you should know.
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USTAXFiling experts are there to guide you in the best possible way. They let you know all the details related to revoking or renouncing your United States citizenship. Also, if you have any issues filing your income tax returns after your renunciation, the tax experts are there to take care of. They will make sure that all your problems are resolved before renunciation, and you don’t have to worry about anything. Also, USTAXFiling experts work day in and day out to keep themselves updated with the amendments related to tax filing or revoking your citizenship, so they are the best to guide you in every aspect. So, what are you waiting for? Reach out to USTAXFiling.in for more details.