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Cash ISA's not available to dual UK/US citizens

Cash ISA's not available to dual UK/US citizens

Old Feb 14th 2013, 4:40 am
  #61  
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Default Re: Cash ISA's not available to dual UK/US citizens

Originally Posted by nun
So get all your expatriating done before your networth is more than $2 million. Then you can file a W-8BEN and be done with US tax on your US retirement accounts and you can move all other money to the UK.
So I guess another key thing is to move retirement money into a Roth IRA as well? Assuming that such a move can be done without too big a tax hit doing the conversion.
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Old Feb 14th 2013, 6:41 am
  #62  
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Default Re: Cash ISA's not available to dual UK/US citizens

Originally Posted by Giantaxe
So I guess another key thing is to move retirement money into a Roth IRA as well? Assuming that such a move can be done without too big a tax hit doing the conversion.
Yes that would be a good thing if expatriation would force you to do the virtual IRA distribution and pay tax on it. Rather than paying income tax on a virtual IRA distribution and then presumably having a large tax free basis in it, but still having to pay income tax on any gains, just rollover the IRA to a ROTH. You'd pay the same amount of income tax, but the roll over amount AND all gains would be US tax free.....and, by the way, also UK tax free.

The ideal way to do IRA to ROTH roll overs is in years when you have low income. If you are living off savings you could well have very little taxable income and you could use tax deductions to rollover without paying any tax at all.
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Old Feb 14th 2013, 6:44 am
  #63  
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Default Re: Cash ISA's not available to dual UK/US citizens

Originally Posted by nun
Yes that would be a good thing if expatriation would force you to do the virtual IRA distribution and pay tax on it. Rather than paying income tax on a virtual IRA distribution and then presumably having a large tax free basis in it, but still having to pay income tax on any gains, just rollover the IRA to a ROTH. You'd pay the same amount of income tax, but the roll over amount AND all gains would be US tax free.....and, by the way, also UK tax free.

The ideal way to do IRA to ROTH roll overs is in years when you have low income. If you are living off savings you could well have very little taxable income and you could use tax deductions to rollover without paying any tax at all.
Do you have to rollover in one go, or can you phase it (to spread the tax-free deductions over more than one tax year)?
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Old Feb 14th 2013, 7:01 am
  #64  
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Default Re: Cash ISA's not available to dual UK/US citizens

Originally Posted by dunroving
Do you have to rollover in one go, or can you phase it (to spread the tax-free deductions over more than one tax year)?
Usually it's best to do a number of small rollovers rather than a single big one so that you don't declare a lot of income in a single year that would take you into a higher tax bracket. If you are expatriating you don't get that option.

Here's a simple example:

Consider a single person taking a single deduction ($5950) and the personal exemption ($3800). This means their first $9750 of income is tax free.

Now suppose the person is living off savings and has no other income, so no tax liability, and has $50k in an IRA that they want to rollover into a ROTH.

Option 1) Rollover $9750 each year until every thing is in the ROTH. This will result in zero tax paid.

Option 2) Rollover $50k all in one year. Taxable amount will be $50k - $9750 = $40.25k. The tax on that is $5991

So Option 1 is obviously better.

Last edited by nun; Feb 14th 2013 at 7:06 am.
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