Duel citizenship and Taxes

[Miss Natalie 0]

I assume others above already mentioned that if you move to a country that in general as higher taxes--as I assume Australia does--you will get a tax credit in the US when you file taxes for taxes already paid. In short: it is not like you will typically end up paying more taxes even though you are still *filing* US taxes forever. There are some rare exceptions; e.g. If the us has a tax on something that Australia doesn't you could end up paying extra. I think for most people this is unusual and the filing us taxes is more just a pain in the rear than generally an extra financial burden.

Thanks for the replies. I think I might be confusing some of the terminology, which is making me more confused!

So as we would both be USCs living permanently in Australia, the treaty would not be applicable as we'd be seen solely as US citizens and nothing more in the eyes of the US, but we would avoid double taxes by applying a tax credit that is in place with AU and US, correct? Is this tax credit the Foreign Earned Income Exclusion (FEIE)?

I'm trying to establish what how much that FEIE is for my hubs and myself. Online I see it's around $99000 for 2014. Is that for each of us, or a combined income? If that's a separate threshold for each of us, there shouldn't be a issues with additional taxes (not expecting us both to gain $100K+ jobs in Australia anytime soon) If it is a combined income, then I am a little concerned about having a 2nd tax obligation each year.

[ExPatty 502]

Thanks for the replies. I think I might be confusing some of the terminology, which is making me more confused!

So as we would both be USCs living permanently in Australia, the treaty would not be applicable as we'd be seen solely as US citizens and nothing more in the eyes of the US, but we would avoid double taxes by applying a tax credit that is in place with AU and US, correct? Is this tax credit the Foreign Earned Income Exclusion (FEIE)?

I'm trying to establish what how much that FEIE is for my hubs and myself. Online I see it's around $99000 for 2014. Is that for each of us, or a combined income? If that's a separate threshold for each of us, there shouldn't be a issues with additional taxes (not expecting us both to gain $100K+ jobs in Australia anytime soon) If it is a combined income, then I am a little concerned about having a 2nd tax obligation each year.

I'm only posting in case somebody else doesn't, as admittedly I've not researched this terribly closely, but based on my reading at your kind of income level (sub $200k) you'd be essentially fine. It's a pain filing, but unless there are weird tax breaks that Australia has that the US doesn't (I"m sure it has some small ones here and there) you are fine. An example of a tax break is the story of this guy: http://www.theguardian.com/politics/2014/nov/20/boris-johnson-us-tax-billUS allows up to $250k exempt from taxes on sale of the home, but UK seems to not have a limit. He hit the limit and thus owed the US money.

I'm fairly sure that even if you're making a boatload of cash like a million a year, you can still not pay additional taxes in the US on it as long as the taxes are the same or higher in Australia; you still can claim foreign tax credits. I think the much lower limits you've found --the FEIE--are limits below which you can exclude that income as considered at all. This means that if you move to a nation with virtually no taxes at all, and they are much lower than the US, you can still exclude consideration of the first hundred grand. It looks to me to be a single amount; if you are married you'd double it.

But again, don't confuse exceeding this limit with meaning that you have to pay taxes twice; ultimately you should never have to pay the same tax twice.

All of this was a hangup on my consideration to apply for citizenship. I thought the benefits ultimately outweighed what amounts essentially to a pain in the butt each year if I ever left the US but is unlikely to cost me too much money beyond the annoyance. And as mentioned you're already stuck with this nonsense because of your husband anyway

[ExPatty 502]

Thanks for the replies. I think I might be confusing some of the terminology, which is making me more confused!

So as we would both be USCs living permanently in Australia, the treaty would not be applicable as we'd be seen solely as US citizens and nothing more in the eyes of the US, but we would avoid double taxes by applying a tax credit that is in place with AU and US, correct? Is this tax credit the Foreign Earned Income Exclusion (FEIE)?

I'm trying to establish what how much that FEIE is for my hubs and myself. Online I see it's around $99000 for 2014. Is that for each of us, or a combined income? If that's a separate threshold for each of us, there shouldn't be a issues with additional taxes (not expecting us both to gain $100K+ jobs in Australia anytime soon) If it is a combined income, then I am a little concerned about having a 2nd tax obligation each year.

I'm only posting in case somebody else doesn't, as admittedly I've not researched this terribly closely, but based on my reading at your kind of income level (sub $200k) you'd be essentially fine. It's a pain filing, but unless there are weird tax breaks that Australia has that the US doesn't (I"m sure it has some small ones here and there) you are fine. An example of a tax break is the story of this guy: http://www.theguardian.com/politics/2014/nov/20/boris-johnson-us-tax-billUS allows up to $250k exempt from taxes on sale of the home, but UK seems to not have a limit. He hit the limit and thus owed the US money.

I'm fairly sure that even if you're making a boatload of cash like a million a year, you can still not pay additional taxes in the US on it as long as the taxes are the same or higher in Australia; you still can claim foreign tax credits. I think the much lower limits you've found --the FEIE--are limits below which you can exclude that income as considered at all. This means that if you move to a nation with virtually no taxes at all, and they are much lower than the US, you can still exclude consideration of the first hundred grand. It looks to me to be a single amount; if you are married you'd double it.

But again, don't confuse exceeding this limit with meaning that you have to pay taxes twice; ultimately you should never have to pay the same tax twice.

All of this was a hangup on my consideration to apply for citizenship. I thought the benefits ultimately outweighed what amounts essentially to a pain in the butt each year if I ever left the US but is unlikely to cost me too much money beyond the annoyance. And as mentioned you're already stuck with this nonsense because of your husband anyway

[john_and_marlene 162]

There are considerations beyond just earned income for US citizens residing abroad. You will have to divulge all foreign assets. If you ever sell foreign real estate, such as a home, you will owe US tax. If you have foreign investment income, you will owe US tax. If you have a foreign bank account, you may owe US tax. The rules for US expats are becoming increasingly difficult to accurately and safely file all the correct forms and stay out of trouble. If you own US mutual funds, you may find that new contributions and reinvestment of dividends may be restricted. If you make a mistake, you may be subject to ridiculous fines or even criminal prosecution.

[Miss Natalie 0]

There are considerations beyond just earned income for US citizens residing abroad. You will have to divulge all foreign assets. If you ever sell foreign real estate, such as a home, you will owe US tax. If you have foreign investment income, you will owe US tax. If you have a foreign bank account, you may owe US tax. The rules for US expats are becoming increasingly difficult to accurately and safely file all the correct forms and stay out of trouble. If you own US mutual funds, you may find that new contributions and reinvestment of dividends may be restricted. If you make a mistake, you may be subject to ridiculous fines or even criminal prosecution.

yeah, I have been mulling (stressing) over this for the entire weekend (my husband will attest for the sleepless nights). Truthfully, I had no intention of becoming a US citizen, but we thought of the practical side once we relocate to Australia.

I do not plan to return live and work in the US again, so becoming a citizen was more based on ties to my husband's family here and of course it would seem a shame to lose all that time and money spent on the Permanent Residency, when it lapses.

I started the N400 process in February as we are trying to move back the Australia by September 2015, and I was aware of the timing issues. Now I am feeling very uncomfortable about the taxation requirements, and uncertain that citizenship is something I wish to pursue. Yes, my husband will still have this obligation, so I'll be dealing with it, but I just not sure it's something I personally want to deal with for the rest of my life, and I understand renouncing US citizenship can be a big pain in the butt, not to mention more money.

Thank you all for your replies though, it's certainly opened a big can of worms!

[ExPatty 502]

yeah, I have been mulling (stressing) over this for the entire weekend (my husband will attest for the sleepless nights). Truthfully, I had no intention of becoming a US citizen, but we thought of the practical side once we relocate to Australia.

I do not plan to return live and work in the US again, so becoming a citizen was more based on ties to my husband's family here and of course it would seem a shame to lose all that time and money spent on the Permanent Residency, when it lapses.

I started the N400 process in February as we are trying to move back the Australia by September 2015, and I was aware of the timing issues. Now I am feeling very uncomfortable about the taxation requirements, and uncertain that citizenship is something I wish to pursue. Yes, my husband will still have this obligation, so I'll be dealing with it, but I just not sure it's something I personally want to deal with for the rest of my life, and I understand renouncing US citizenship can be a big pain in the butt, not to mention more money.

Thank you all for your replies though, it's certainly opened a big can of worms!

Only you can decide if it's worth it, and I absolutely agree as would virtually everyone here that it's a huge pain in the rear. Before you decide not to apply for citizenship, though, do be sure you know exactly what these filing requirements will mean. It's possible that they're far less invasive than you think (just as the opposite may be true).

Remember also that the internet tends to amplify things unnaturally, at times. e.g. you can find news articles about people relinquishing US citizenship because of tax requirements. But, when you lose closer, it's about 3-5k/year. A meaningless number for a country this big, just meaningless. Also, the US is hardly harassing everybody who crosses the border and drilling them on tax obligations as a matter of policy.

I would offer that just as you've been in the US for a while now, you could in the future. Should you do that, you'd end up repeating a lot of immigration hassles. If your home country were a dump, this would be a no-brainer decision

Edited March 2, 2015 by ExPatty