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Monetary advantages of citizenship

Monetary advantages of citizenship

Old Apr 7th 2009, 10:51 pm
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Default Monetary advantages of citizenship

As it seems if I do decide to apply for citizenship later this year I am likely to be making a bigger contribution to the US in the way of income taxes I am wondering if there are any monetary advantages to consider on the plus side.

As an example is Social Security likely to be more if I am a citizen than a PR.

I am trying to gather as much financial info as possible to decide what to do.
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Old Apr 7th 2009, 10:56 pm
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Default Re: Monetary advantages of citizenship

Originally Posted by lansbury View Post
As it seems if I do decide to apply for citizenship later this year I am likely to be making a bigger contribution to the US in the way of income taxes I am wondering if there are any monetary advantages to consider on the plus side.

As an example is Social Security likely to be more if I am a citizen than a PR.

I am trying to gather as much financial info as possible to decide what to do.
Why would you be paying more income tax as a citizen?

I think the biggy is that, if a PR dies, the whole estate is taxed, whereas if citizens snuff it, they get an exemption for the spouse - around a quarter of a million, I believe.

I hear conflicting information as to whether a PR who leaves the US can still claim SS/pension from abroad. I believe the answer is yes, but have heard others say no.

If you become a citizen, you have to declare your worldwide income for all eternity, irrespective of where you hang your hat. I have also read that any income above around $87k is outside dual taxation agreements, i.e. could get taxed twice.

But basically I am totally confused by the whole thing, so if someone else can shed any light on this...
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Old Apr 7th 2009, 11:10 pm
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Default Re: Monetary advantages of citizenship

Originally Posted by Elvira View Post
Why would you be paying more income tax as a citizen?
My UK government pension at the moment can only be taxed in the UK and does not have to be declared as income on our US tax return. As Oregon use the figure in a box on Form 1040 to work out State income tax I don't pay State income tax either.

If I take US citizenship under the UK/US Tax Convention my pension becomes taxable in the US, or if I still pay tax in the UK it has then to be declared on a US tax return. I would lose the benefit of my UK personal allowance, about £6400, and would pay Federal income tax on that and State income tax on all of it.
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Old Apr 8th 2009, 12:32 am
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Default Re: Monetary advantages of citizenship

Originally Posted by lansbury View Post
My UK government pension at the moment can only be taxed in the UK and does not have to be declared as income on our US tax return. As Oregon use the figure in a box on Form 1040 to work out State income tax I don't pay State income tax either.
I assume you're a PR. If so, I can't see why your taxes would change. I.e., you should already be declaring your worldwide income to IRS. And how are you getting out of Oregon income tax?
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Old Apr 8th 2009, 6:41 am
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Default Re: Monetary advantages of citizenship

Originally Posted by AdobePinon View Post
I assume you're a PR. If so, I can't see why your taxes would change. I.e., you should already be declaring your worldwide income to IRS. And how are you getting out of Oregon income tax?
Exactly as I said a UK government service pension doesn't get declared on a US tax return, and as Oregon uses a figure from the Federal return I don't pay that either.

I have a CPA do the returns and as others on BE who have similar pensions agree he is doing it correctly. Unfortunately when you become a US citizen the UK/US Tax Convention changes the right to collect tax on a government service pension from only the country paying it to the country of residence.
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Old Apr 8th 2009, 9:13 am
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Default Re: Monetary advantages of citizenship

Originally Posted by lansbury View Post
As it seems if I do decide to apply for citizenship later this year I am likely to be making a bigger contribution to the US in the way of income taxes I am wondering if there are any monetary advantages to consider on the plus side.
As an example is Social Security likely to be more if I am a citizen than a PR.
I am trying to gather as much financial info as possible to decide what to do.
Can't think of any financial advantages.

Reasons are personal/ethical and one or two practical ones, but then I never considered the $ side when I did it.
The biggest advantage is it divorces you from the USCIS.
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Old Apr 8th 2009, 12:18 pm
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Default Re: Monetary advantages of citizenship

Originally Posted by Xebedee View Post
Can't think of any financial advantages.

Reasons are personal/ethical and one or two practical ones, but then I never considered the $ side when I did it.
The biggest advantage is it divorces you from the USCIS.
Never heard of you being able to avoid declaring a UK Pension, legally. I am sure it is often forgotten.

But plenty of threads, in the current climate seems a non brainer to just do it.
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Old Apr 8th 2009, 4:48 pm
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Default Re: Monetary advantages of citizenship

Originally Posted by Elvira View Post
I think the biggy is that, if a PR dies, the whole estate is taxed, whereas if citizens snuff it, they get an exemption for the spouse - around a quarter of a million, I believe.
Thanks that was something I wasn't aware of and needs to be considered.
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Old Apr 8th 2009, 4:54 pm
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Default Re: Monetary advantages of citizenship

Originally Posted by Xebedee View Post
Can't think of any financial advantages.

Reasons are personal/ethical and one or two practical ones, but then I never considered the $ side when I did it.
The biggest advantage is it divorces you from the USCIS.
I didn't think there were any advantages but had a nagging memory that I'd read in a thread on BE it made a difference to social security.

As taking citizenship is likely, I worked out, to have me paying about an extra $3000 in tax it is something which has to be considered alongside all the normal reasons for doing it. Needs a consultation with the CPA to see if my figures are correct or what the true impact might be.
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Old Apr 8th 2009, 5:06 pm
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Default Re: Monetary advantages of citizenship

Elvira's point is the one that I've read a lot about too....I'm sure its been on here several times in the past.

I might be wrong, but I also seem to think there is something else to do with retirement taxes that are worse if you just have a GC as opposed to citizenship - especially if you move out of the US in later life and therefore lose your GC.....

As others have said the main reason for citizenship isn't financial its about freedom (of movement) and civil rights. I cannot think of any strong reason not to apply if eligible.
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Old Apr 8th 2009, 5:09 pm
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Default Re: Monetary advantages of citizenship

Originally Posted by lansbury View Post
I didn't think there were any advantages but had a nagging memory that I'd read in a thread on BE it made a difference to social security.

SNIP.
It makes no difference.

I don't understand how come you don't have to declare your UK pension here but pay tax there. They never offered me that option. I don't think they knew I had added US citizenship.
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Old Apr 9th 2009, 1:00 am
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Default Re: Monetary advantages of citizenship

Originally Posted by Elvira View Post
I think the biggy is that, if a PR dies, the whole estate is taxed, whereas if citizens snuff it, they get an exemption for the spouse - around a quarter of a million, I believe.

I hear conflicting information as to whether a PR who leaves the US can still claim SS/pension from abroad. I believe the answer is yes, but have heard others say no.
I think the exemption is $2M for citizens or something stupidly high like that for federal there might be state taxes involved though.

PR can only claim SS pension whilst a LPR, lossing status should kill the pension, but they can then claim those contributions in the UK to get a UK pension, not so good if you qualify for both. Though that might have changed recently, you certainly can't claim a spouses aboard if widowed though unless your a USC.
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Old Apr 9th 2009, 1:05 am
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Default Re: Monetary advantages of citizenship

Originally Posted by Bob View Post
PR can only claim SS pension whilst a LPR, lossing status should kill the pension.......
You see, Bob, I have seen this stated sooooooooo many times, but have never actually seen the source of this.

I've also read the opposite...
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Old Apr 9th 2009, 1:33 am
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Default Re: Monetary advantages of citizenship

Originally Posted by Xebedee View Post
Can't think of any financial advantages.

Reasons are personal/ethical and one or two practical ones, but then I never considered the $ side when I did it.
The biggest advantage is it divorces you from the USCIS.
I have had some sweet divorces - but that one sounds the best of all !

I still can't go back to help others in the immigration forum as I still have post traumatic USCIS disorder

I wake up every 2 hours to check I still have my GC hidden
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Old Apr 9th 2009, 1:46 am
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Default Re: Monetary advantages of citizenship

Originally Posted by paddingtongreen View Post
It makes no difference.

I don't understand how come you don't have to declare your UK pension here but pay tax there. They never offered me that option. I don't think they knew I had added US citizenship.
It's for 'service' to the UK government - I have a small one (and a small govt service pension also haha !) and do not declare it in the US - but they tax it in the UK. My main pension is a company pension which is not taxed in the UK but it is taxed in the US

I will pay US tax on my UK State Pension when it starts, so it's just 'service' pensions that are taxed in the UK only

My main income used to be investment income, but that's negative now - I have more capital losses than dick cheney has torture methods, and they should last me for life so I will never pay capital gains taxes again

That's the cheerful way to look at it...

If I become a USC next year I will have to declare my small one in the US and pay tax. At the moment, I dont pay tax as its tinier than the UK personal allowance of £6500 or whatever. So my tiny one is taxable but the bottom line is I dont pay tax on it anywhere as its knocked out by the PA and that will change to my detriment....

Fortunately, mine is so small and crinkly, that it wont stop me getting the passport if other factors say yes.... The other factors say 'think long and hard about your small one before deciding'
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