provided on this site is for general guidance only
and is often simplified. Actual IRS procedures are
complex, and taxpayers should obtain professional
assistance or use IRS sources for complete information.
Of Resident Alien
foreign nationals in the US are taxed just about on
the same basis as a US national (see http://www.usa-federal-state-individual-tax.com/federal_tax.asp),
that is to say, on their world-wide income, comprehensively
defined. There are tax credits under double tax treaties
for some foreign tax deductions.
the offshore investment options are not very interesting,
indeed an expatriate's existing offshore investments
may fall under US tax laws, so that one is well advised
to take professional advice on the tax situation before
becoming tax-resident in the US.
US PFIC (Passive Foreign Investment Corporation) legislation,
gains on disposal of holdings in almost any kind of
offshore or mutual fund are likely to be taxed as
income, spread over the years in which the investment
activity in shares while one is US-resident may quite
possibly bring on capital gains tax or income tax
charges, depending on where and how the acquisitions
were made. An expatriate is not likely to be able
to make use of the various pensions-related tax-breaks
for share acquisition available to US citizens, unless
the residence is for a long period; and at the same
time tax deductions for US tax purposes on continuing
contributions to pension plans in another country
will probably not be available.
all, it will probably be best to make sure that existing
offshore investments do not mature and are not disposed
of during US residence, and that any new investments
will not need to be changed and will not mature until
after US residence has ceased.
also needs to be aware that a long period of US residence,
particularly if close to retirement, may mean that
the IRS will continue to have an ability to tax after
residence has ceased.
light of all the above, it can be seen that professional
advice is even more than usually essential for anyone
contemplating US residence, or thinking of carrying
on an investment activity while US resident.
tax reductions introduced during the Bush presidency,
the Alternative Minimum Tax, which applies to resident
aliens as much as to US citizens, is a growing menace
for tens of millions of American taxpayers.
legislative measures to restrict its impact are currently
making their way through Congress.