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GC Holder -> Questions on Citizenship, Taxes, and moving to Germany

GC Holder -> Questions on Citizenship, Taxes, and moving to Germany

Old Feb 21st 2024, 5:42 pm
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Default GC Holder -> Questions on Citizenship, Taxes, and moving abroad.

I have created a few posts to help me explore my best options. am thinking of pivoting from a green card to applying for US citizenship, then moving to work in Germany, followed by a few years in the UK, and finally moving back to the states.

I am 48 years old, hold a UK passport and a Green Card, and have held the green card for 15 years.
In the US, I have a 401k, savings, and stocks, totaling around $400k - $500k. My social security is paid up, allowing me to make withdrawals when I retire.
In the UK, I have a property that I rent out, worth around 300k GBP, with 48k GBP in the bank and a small private pension worth 20k GBP.
  1. Am I correct in understanding that if I am living abroad, I only need to file with the IRS if I make over $100k a year?
  2. Are there any other financial considerations or penalties I should think about?
  3. If I obtain a US passport, is there a 'bedding in' period before I can consider leaving the country?
Thank you in advance. I appreciate all the guidance I have received from this community while I figure and understand my best options.

Last edited by billyeasy; Feb 21st 2024 at 6:21 pm.
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Old Feb 21st 2024, 7:40 pm
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Default Re: GC Holder -> Questions on Citizenship, Taxes, and moving to Germany

Hi

1) I'm assuming you are talking about the foreign income exclusion that applies to overseas Americans. Last I checked, this foreign income exclusion (about $100k) ONLY applies if you file your tax return. You cannot claim the exclusion if you don't file a tax return. It's kind of a catch-22 thing--you must file to get the exclusion, and if you don't do the paperwork, you don't get it. In general, the idea of "don't owe, don't file" is not entirely accurate. https://turbotax.intuit.com/tax-tips...-tax/L5QvbFosB

2) Besides the foreign income exclusion, there is also a housing exclusion you can take (but I think this only applies to rent). This can also reduce your tax burden in the US. https://www.irs.gov/individuals/inte...n-or-deduction

3) Not that I know of.

Last edited by penguinsix; Feb 21st 2024 at 7:43 pm.
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Old Feb 21st 2024, 8:13 pm
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Default Re: GC Holder -> Questions on Citizenship, Taxes, and moving to Germany

1. As mentioned above you will need to file an IRS return to get the foreign earned income inclusion and as a “US person” you are required to file a return.

2. When planning for your retirement bear in mind that your foreign pensions of £20k will reduce your SS by over $500/month due to WEP (Windfall Elimination Provision)

3. I received my first US passport days before I left the country on business to Belgium. Once you become a USC you are required to travel on your US passport.

ps
I think it is a good plan to get your US citizenship

Last edited by durham_lad; Feb 21st 2024 at 8:15 pm.
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Old Feb 22nd 2024, 1:35 am
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Default Re: GC Holder -> Questions on Citizenship, Taxes, and moving to Germany

Originally Posted by durham_lad

2. When planning for your retirement bear in mind that your foreign pensions of £20k will reduce your SS by over $500/month due to WEP (Windfall Elimination Provision)

In the FWIW department, the WEP is politically unpopular and has been proposed to be on the Congressional chopping block for quite some time. Although repeal has never passed, the proposal never seems to quite go away. Perhaps one day, who knows.
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Old Feb 22nd 2024, 7:44 am
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Default Re: GC Holder -> Questions on Citizenship, Taxes, and moving to Germany

Originally Posted by S Folinsky
In the FWIW department, the WEP is politically unpopular and has been proposed to be on the Congressional chopping block for quite some time. Although repeal has never passed, the proposal never seems to quite go away. Perhaps one day, who knows.
We can always hope, and since it affects US government workers a lot more than overseas workers it has more of a chance.

The latest attempt at repeal has been sat in committee for over a year. Only when it gets out of committee will there be a slight chance of passage.

https://www.congress.gov/bill/118th-.../82/cosponsors

As always, plan for the worst and hope for the best.
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Old Feb 23rd 2024, 6:53 pm
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Default Re: GC Holder -> Questions on Citizenship, Taxes, and moving to Germany

Thank you all. I had no idea about the WEP. Can I ask a related question? If I am no longer a green card holder or never become a US citizen, thus no longer residing in the USA, would the WEP still apply when my SS benefits are paid?
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Old Feb 23rd 2024, 7:06 pm
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Default Re: GC Holder -> Questions on Citizenship, Taxes, and moving to Germany

Originally Posted by billyeasy
Thank you all. I had no idea about the WEP. Can I ask a related question? If I am no longer a green card holder or never become a US citizen, thus no longer residing in the USA, would the WEP still apply when my SS benefits are paid?
I’m pretty sure that WEP will still apply. It is purely a financial situation. The system is designed so the lowest earning workers get 90% of their income when they retire and folks who earn additional pensions from companies without paying into SS have some of their SS reduced.
If you are interested in the details, read about it here.

https://www.ssa.gov/pubs/EN-05-10045.pdf
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Old Feb 23rd 2024, 7:33 pm
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Default Re: GC Holder -> Questions on Citizenship, Taxes, and moving to Germany

Originally Posted by durham_lad
I’m pretty sure that WEP will still apply. It is purely a financial situation. The system is designed so the lowest earning workers get 90% of their income when they retire and folks who earn additional pensions from companies without paying into SS have some of their SS reduced.
If you are interested in the details, read about it here.

https://www.ssa.gov/pubs/EN-05-10045.pdf
Thank you for the link. I'm grateful for this site and members like you; otherwise, I would not know anything about this and would run into unforeseeable financial costs I hadn't budgeted for. I also spoke to the UK Pension Department and received an estimated state pension forecast, likely around 75 pounds a week.
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Old Feb 29th 2024, 11:01 pm
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Default Re: GC Holder -> Questions on Citizenship, Taxes, and moving to Germany

Originally Posted by billyeasy
Thank you for the link. I'm grateful for this site and members like you; otherwise, I would not know anything about this and would run into unforeseeable financial costs I hadn't budgeted for. I also spoke to the UK Pension Department and received an estimated state pension forecast, likely around 75 pounds a week.
Another option regarding WEP would be to sell my British private pension prior to retirement ? Or is this naive and would get dinged over here somehow?

I also have a UK state pension, the estimated weekly forecast is 75.82 pounds a week.
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Old Mar 1st 2024, 12:39 am
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Default Re: GC Holder -> Questions on Citizenship, Taxes, and moving to Germany

Well as always it’s complicated, but if by sell you mean cash it in and take all of it as a lump sum then social security have a formula to determine what your pension would have been had you not cashed it out and will WEP you on whatever that value is. The only way out of WEP is to work enough years with SS contributions to reduce or eliminate WEP, or to cash the pension in before you become eligible to take the pension which given U.K. rules is almost impossible to do unless you are in such bad health that it impacts your life expectancy. Same thing if you buy an annuity. You could try using drawdown instead of a pension because that muddies the waters somewhat by eliminating a regular pension payment. However your current pension provider would have to allow that and few do so for US tax payers and those that do won’t allow US tax payers to transfer in. Rolling it over into a SIPP would allow drawdown however you can now only open an international SIPP with higher fees and usually restricted investments for US taxpayers and I am not sure the hassle and expense would be worth it for a £20K pot.

Any part of your pension based upon voluntary contributions such as voluntary class 2 or 3 NICs will escape WEP, as will any private pension based upon additional voluntary contributions beyond those required by a company scheme. You definitely should look at making voluntary NI contributions as the ROI is impressive and will help mitigate any pension shortfall due to WEP.
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Old Mar 1st 2024, 2:22 pm
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Default Re: GC Holder -> Questions on Citizenship, Taxes, and moving abroad.

Originally Posted by billyeasy
If I obtain a US passport, is there a 'bedding in' period before I can consider leaving the country?Thank you in advance. I appreciate all the guidance I have received from this community while I figure and understand my best options.
Good question. The Immigration & Nationality Act USED to contain a requirement that the naturalization process include a promise to reside in the US. There was a concomitant section that taking up foreign residence within a certain time (I forget the length) raised a presumption that one lied in the process thereby supporting possible denaturalization. Those provisions were repealed quite some time ago (again, I don’t remember).
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Old Mar 8th 2024, 6:36 pm
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Default Re: GC Holder -> Questions on Citizenship, Taxes, and moving to Germany

Originally Posted by Glasgow Girl
Well as always it’s complicated, but if by sell you mean cash it in and take all of it as a lump sum then social security have a formula to determine what your pension would have been had you not cashed it out and will WEP you on whatever that value is. The only way out of WEP is to work enough years with SS contributions to reduce or eliminate WEP, or to cash the pension in before you become eligible to take the pension which given U.K. rules is almost impossible to do unless you are in such bad health that it impacts your life expectancy. Same thing if you buy an annuity. You could try using drawdown instead of a pension because that muddies the waters somewhat by eliminating a regular pension payment. However your current pension provider would have to allow that and few do so for US tax payers and those that do won’t allow US tax payers to transfer in. Rolling it over into a SIPP would allow drawdown however you can now only open an international SIPP with higher fees and usually restricted investments for US taxpayers and I am not sure the hassle and expense would be worth it for a £20K pot.

Any part of your pension based upon voluntary contributions such as voluntary class 2 or 3 NICs will escape WEP, as will any private pension based upon additional voluntary contributions beyond those required by a company scheme. You definitely should look at making voluntary NI contributions as the ROI is impressive and will help mitigate any pension shortfall due to WEP.
Thanks, will look into making the voluntary NI contributions, I called the NI office, they referred me to the Inland Revenue, I need to complete CF83 paperwork.
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Old Mar 8th 2024, 6:36 pm
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Default Re: GC Holder -> Questions on Citizenship, Taxes, and moving abroad.

Originally Posted by S Folinsky
Good question. The Immigration & Nationality Act USED to contain a requirement that the naturalization process include a promise to reside in the US. There was a concomitant section that taking up foreign residence within a certain time (I forget the length) raised a presumption that one lied in the process thereby supporting possible denaturalization. Those provisions were repealed quite some time ago (again, I don’t remember).
Phew...glad I asked.
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Old Mar 9th 2024, 2:26 am
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Default Re: GC Holder -> Questions on Citizenship, Taxes, and moving to Germany

Originally Posted by S Folinsky
In the FWIW department, the WEP is politically unpopular and has been proposed to be on the Congressional chopping block for quite some time. Although repeal has never passed, the proposal never seems to quite go away. Perhaps one day, who knows.
I am sceptical that WEP will be eliminated (at least without some alternative adjustments to how SS is calculated), primarily as those politicians who talk about it seem to lose interest (go quiet), I suspect because at some point someone briefs them on how WEP is designed to claw back unjustified enrichment, not unfairly penalise people.
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