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Moving to US on E2 visa from UK - UK Personal Allowance

Moving to US on E2 visa from UK - UK Personal Allowance

Old Mar 5th 2019, 11:32 pm
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Default Moving to US on E2 visa from UK - UK Personal Allowance

Hi,

Myself, husband and 3 children are moving out the Texas in July/August on an E2 investor visa. We own a house in London, which will be rented out.

I understand we will be classed as "Non resident Aliens" in the USA, so will not be liable to pay tax on our worldwide income.

The house will rent out for approx £2300 per month. (£27,600 per year) We will have no further income from the UK.

My question is... Even though myself and my husband will be living in the USA, will we still have our UK personal allowance on our income ?

The personal allowance is currently £11,850, so myself and my husband will have an allowance of £23,700 before being taxed on income.

Thanks for you help
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Old Mar 5th 2019, 11:48 pm
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Default Re: Moving to US on E2 visa from UK - UK Personal Allowance

I assume you will be resident for tax purposes and need to pay tax on your worldwide income.
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Old Mar 6th 2019, 12:09 am
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Default Re: Moving to US on E2 visa from UK - UK Personal Allowance

I agree with Boiler. Just because you are non-resident aliens for immigration purposes, if you are living and working in the USA you will be resident for tax purposes and will need to file a US tax return and report all worldwide income. Whether you actually owe tax or not depends on many factors.

I don't know about personal allowance, sorry.

Rene
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Old Mar 6th 2019, 12:13 am
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Default Re: Moving to US on E2 visa from UK - UK Personal Allowance

You'll become a US resident for tax purposes as soon as you hit the IRS criteria. One of these is being physically in the US for a certain amount of days.

You won't be a UK tax resident and so personal allowance is not applicable.
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Old Mar 6th 2019, 12:17 am
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Default Re: Moving to US on E2 visa from UK - UK Personal Allowance

'I understand we will be classed as "Non resident Aliens" in the USA, so will not be liable to pay tax on our worldwide income.'

Why do you understand this?

Alarm bells.

Stop,what you're doing, stay calm, and reevaluate for a moment.

(E2...visa from hell. Can be an extended 'holiday' with great risk and little/no return.)

Last edited by Hotscot; Mar 6th 2019 at 12:28 am.
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Old Mar 6th 2019, 12:23 am
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Default Re: Moving to US on E2 visa from UK - UK Personal Allowance

Generally speaking E-2 visa holders are resident aliens for the purposes of taxation, because they are physically present in the US, presumably for most of the year (anything more than six months of the year makes you tax resident in the US).

You may be liable for tax in the UK on rental income (I am not certain of the precise rules these days), but the US rules for taxing rental income are dramatically different from those in the UK and there are numerous deductions that you make from gross rental income to reach net taxable income, such that if you have a valuable property and a significant mortgage you can quite possibly have a taxable loss for the purposes of calculating your US tax liability. Deductions include the following: mortgage interest, depreciation of the building (but not the land - use 80% of the purchase price as a rule of thumb for the cost of the building unless you have good reason to use a different split, such as if the land has significant development potential) at a rate of 1/40 per year, insurance, agent/ management fees, interest, repairs and maintenance, marketing and advertising, property taxes (if any), etc.

Obviously if you have a valuable home then depreciation can be quite a large sum - a £500,000 home, including £100,000 for the land, would generate £10,000 of depreciation, and a £200,000 mortgage might generate an interest charge of another £10,000, and those two alone would wipe out most of £2,000/mth rent.

Note deducting depreciation is mandatory.

Last edited by Pulaski; Mar 6th 2019 at 2:03 am.
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Old Mar 6th 2019, 12:28 am
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Default Re: Moving to US on E2 visa from UK - UK Personal Allowance

Being very neutral/logical Pulaski.
Accurate though.
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Old Mar 6th 2019, 12:29 am
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Default Re: Moving to US on E2 visa from UK - UK Personal Allowance

Originally Posted by Hotscot View Post
Why do you understand this?.)
A non-resident alien is an individual who has not passed the green card test or the substantial presence test. ... Resident aliens are taxed on all income as if they were a citizen of the United States, but a nonresident alien is subject to taxation only under specific circumstances.
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Old Mar 6th 2019, 12:39 am
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Default Re: Moving to US on E2 visa from UK - UK Personal Allowance

Sure.
Depending on the requirements.

You're going back and forth?

Not being snarky.

But for the benefit of the forum could you please outline your plan in detail?

It's helpful to others. And there's a wealth of friendly$$$ information here for you.
Please note, just because members ask for clarification it's not really being critical.

(I see you're intending to move on an E2 visa for two years? And then? I'm intrigued what the plan is..you could say it's no one's business but you're here asking for advice and people get naturally curious..)

Last edited by Hotscot; Mar 6th 2019 at 12:48 am.
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Old Mar 6th 2019, 12:55 am
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Default Re: Moving to US on E2 visa from UK - UK Personal Allowance

Hi HotScot,

I do not understand what you mean by going back and forth ?

I asked a question and was hoping for a reply from someone with experience in this area (ie someone who has done exactly what I am planning to do).

Kind Regards,

Richard

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Old Mar 6th 2019, 1:19 am
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Default Re: Moving to US on E2 visa from UK - UK Personal Allowance

Originally Posted by cazzababes View Post
A non-resident alien is an individual who has not passed the green card test or the substantial presence test. ... Resident aliens are taxed on all income as if they were a citizen of the United States, but a nonresident alien is subject to taxation only under specific circumstances.
You will pass the substantial presence test if you stay inside the USA more than 180 days a year.

HotScot was asking if you'll be going back and forth between countries such that you'll be in the USA less than 180 days a year.

Rene

Last edited by Noorah101; Mar 6th 2019 at 1:21 am.
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Old Mar 6th 2019, 1:24 am
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Default Re: Moving to US on E2 visa from UK - UK Personal Allowance

Note the substantial presence test can also be applied across multiple years (at a reducing rate). Could pose difficult to outrun if that is the plan.
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Old Mar 6th 2019, 1:26 am
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Default Re: Moving to US on E2 visa from UK - UK Personal Allowance

Yes..a general outline of plans would be helpful.
Single questions generally have very variable responses depending on scenarios.

For example...it's hard to see how you can maintain an E2 without being present here.
And if you don't intend being here why have an E2 anyway? You don't get a Green Card.
So what's the end goal if not to at least live in the USA for a spell? An extended holiday maybe.

If you outline what you're really after you'll get excellent $$$ advice,

Last edited by Hotscot; Mar 6th 2019 at 1:54 am.
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Old Mar 6th 2019, 1:40 am
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Default Re: Moving to US on E2 visa from UK - UK Personal Allowance

Originally Posted by cazzababes View Post
A non-resident alien is an individual who has not passed the green card test or the substantial presence test. ... Resident aliens are taxed on all income as if they were a citizen of the United States, but a nonresident alien is subject to taxation only under specific circumstances.
But you will pass the substantial presence test, in the second year, if not the first, unless as Hotscot suggested, you leave the US frequently (back and forth) and remain outside the US for more than six months of the year, and as Tom mentioned, there are some weird calculations such that the time allowed in the US to get snagged by "substantial presence" declines in consecutive years, eventually down to only 4 months a year. But in any case, I can't help be think that that would cost more in air travel than it would save you in taxes.

Last edited by Pulaski; Mar 6th 2019 at 1:42 am.
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Old Mar 6th 2019, 1:47 am
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Default Re: Moving to US on E2 visa from UK - UK Personal Allowance

Well..depends how many millions the business makes...

An E2 can be a fun thing if you don't expect much stability from it. It's a very risky experience unless you have substantial $$$dosh$$$ behind it as most businesses fail.

Personally I'd wait until I could do an E5. At least you'd get something useful.

Last edited by Hotscot; Mar 6th 2019 at 1:57 am.
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