mikefrom

Thank you taking a read, coming at this naively, need guidance from those who have walked in these shoes before me.

I am an employed 47 year old British citizen, a green card holder for past 14 years, prior to that on an L1-A and L1-B visa.

I have a 401k worth approx $350k, savings of $25k, stock portfolio at $75k, and private stock in a startup that one day might be worth something or nothing.

In the UK, I own a flat that I currently rent out, and have a UK pension worth 25k GBP.

I am 75% sure I will remain in the UK, I see three choices:-

a) Become a dual citizen, i.e apply for a US passport.

b) Keep my green card and make visits to keep it up,

c) Avoid A and B, move back permanently as a British citizen.

Based on a, b, c matrix above, and pros and cons:

1. What happens to social security that I paid into in the US?

2. What happens with my 401k? can I keep it in the US and take payouts upon retirement?

3. If I move back to the UK with either a green card or an American password, do I have to pay UK and US tax too?

Thank You for your patience.

tom169

I would recommend spending a little on a US/UK tax attorney or dual CPA/CA.

Glasgow Girl

1. Your social security is unaffected by whatever you do. You will be paid the same wherever you live, no matter your citizenship.

2. Most major employers will require that you roll over your 401K out of their scheme and into an independent broker. Most of the major brokers in the US will accept the transfer and allow you to maintain the 401K and take withdrawals wherever you live, no matter your citizenship.

3. If you live in the UK with a GC or as a US citizen you will be subject to both UK and US taxes. If the UK tax due is higher than the US then you will have nothing further to pay to the US although you will still have to complete a tax return with Forms 8938, FBARs, and any other forms required. If US tax due is higher than the UK tax due you will have to pay the difference to the US and of course complete a tax return, FBARs, and any other forms required.

You also want to take into account the impact on your day to day finances if you live in the UK as a US citizen. Opening bank or broker accounts, getting a mortgage and other financial transactions are made a lot more difficult if you are a U.S. citizen in the UK.

Olly_

Option B isn't viable, by leaving the USA and returning to live in the UK you'll be abandoning your status and eventually on one of your visits you'll get referred to an immigration judge...

You could get a re-entry permit which would buy you a couple of years to decide if you want to return but becoming a citizen would keep the door open to returning in the future at the expense of filing US taxes for the rest of your life.

tht

IRS maybe, and as a USC you can claim a foreign income exclusion, but on a GC, you may owe state or city tax in the place you are “resident”. And the UK tax credit that builds up can’t be used for state and city tax.

durham_lad

To add to Glasgow’s post I would roll the 401k into an IRA. It is a tax free event, will give many investment options and if you choice a large broker for your IRA then it is very easy to manage from the UK.

This is what my wife and I did and later our son. It is much easier to do this while you are still living in the USA
and our son managed this easy enough even though he left the USA a week after he quit his job.

durham_lad

Just to clarify this, you can only exclude foreign earned income, foreign income from other sources such as interest and rental is not excludable. Since the OP has rental income from the UK I think he will be better off using foreign tax credits.

Pulaski

You said (post #1) "remain in the UK", so taking that at face value i.e. you are currently living in the UK, and expect to remain there, then option a) isn't open to you either, as you cannot naturalize as a US citizen while living outside the US.

As an aside, naturalizing as a US citizen and applying for a US passport are two entirely separate matters, and require separate applications.

Obtaining US citizenship does not require that a US passport be applied for, however if you intend to travel outside of the US then obtaining a US passport is obligatory, but requires a second application after the citizenship oath ceremony.

Otherwise.

1 No difference.

2 No difference.

3 No difference, unless/until you complete an I-407 and relinquish your PR status/ green card.

As a practical point, before leaving the US entirely, as either a USC or green card holder, you should consider establishing residence in a taxpayer-friendly state, otherwise you may find that your most recent state of residence still has its claws in you for state income and estate/ inheritance taxes. At least in the first instance I would start by looking at states with 0% income tax.

Jerseygirl

You can naturalize whilst living out of the US. I have known several people who became US citizens whilst they were on secondment overseas. Obviously that is entirely different to choosing to live in the UK.

Pulaski

Er, yeah.

salmotrutta

If you leave the US and have US citizenship or even an expired green card you are still liable to reporting to the US tax IRS. If you give up US citizenship or your green card then you have to pay an exit tax on your global worth of all your assets as if you liquidated them on the day you left. Including pensions! So it's well worth getting a specialist involved so that you can minimise the amount you have to pay.

We found this out as we are planning to leave the US to go back to Canada.

durham_lad

Definitely an issue for high net worth individuals.

https://www.irs.gov/individuals/international-taxpayers/expatriation-tax

salmotrutta

Absolutely - thanks for sharing. It's problem for us as we have both recently retired and are at our highest net worth for the rest of our lives with unrealised pensions and a house to sell.

Feels like the "Hotel California" sometimes....

mikefrom

Thank you, can I ask, when I come to the age of 59, how does paying taxes on withdrawals if I am not a GC or USC anymore?

mikefrom

Thank you, I checked with the social security department, I have 40 credits, my understanding is that this will be a tax free benefit payment, if at that point I am living in the UK and no longer a GC or a USC, would the UK expect me to pay tax on this?