whatsnext

Hi all, I was referred to this forum by someone on another forum. I have already spent all of last night browsing and searching...such a useful resource.

My wife and I both hold dual German/Australian citizenship, since we lived downunder for over ten years. We moved back to Europe two years ago but do not feel home here anymore; we no longer fit in ... our world views and perspectives have changed too much, and we feel that we have adopted the expat/world citizen mentality.

So we were already planning on going back ... despite some concerns about that step, too.

But then we were selected for further processing for a visa in the green card (DV) lottery in May 2013!

So after the first excitement about an unexpected potential "plan B" for our lives, I started researching what it actually means to be living in the US, in comparison to Australia ... mainly from a financial and taxation point of view than anything.

While the prospect of living in the USA sounds very appealing to us for a number of reasons, there are also quite a few real concerns we have.

I am trying to keep it short, but it all comes down to:
- The health care system and subsequently the incredible cost of health care insurance (especially with the more recent controversies, resulting in very high monthly premiums and annual deductables/out-of-pocket expenses that are so high that you are essentially paying lots of money just to have emergency cover.
- High property taxes that seem to be based solely on the assessed value (making it feel like paying rent for your own property)
- However, places like Florida seem to be incredibly affordable to buy property. California in most areas in my online research however, were almost as expensive as inflated Aussie prices and mostly really old stock, i.e. 1920's to 1960's and shabby looking. Renting however, no matter where, seems like much better value for money compared to Australia.
- In the scenario of self-employment, I find this thing called 'self-employment tax' (alias "social security and medicare tax", but at double the rate of 15.3%) a weird institution, as it seems to be applied from the first dollar earned and therefore making it difficult to find the initial cash flow going. Besides, it is a weird concept to pay for the 2.9% medicare component without getting health insurance for it but simply only support those aged 65 and over.
- Then there is state income tax in some states on top of federal income tax
- I don't like their citizenship based tax system, I cannot relate to Fbar and Facta. I have read too many horror stories of what that means if someone decides to live outside of the US in the future, without wanting to give up their green cards/citizenship.


In comparison, with Australia I have the following concerns:
- Rental accommodation in the cities are reflecting very expensive property prices. We used to be living in Brisbane but would like to live in Sydney if we were going back. However, the minimum weekly rent is $500pw ($2,200pm) for simple 1-2 bedroom units that are not up to our standard. It really seems more like $700 ($3,000) per month is required for rent!
- In fact, everything in Australia has gotten really expensive and salaried incomes have not kept pace to the same degree. It is probably the wrong comparison, but groceries and eating out is about half to one third the cost in Germany! However, when we visited Florida a year ago, we were surprised how expensive some of the grocery places were, but perhaps we did not find the cheaper options (apart from Walmart and Aldi).
- I really love the Medicare system, which provides a good basic health cover at extremely low cost. If you don't have an income or fall below certain thresholds, you don't have to pay, but are still fully covered!


Anyone here having similar thoughts, perhaps from an ex-Aussie, now US background ?

ScousePete

Hello and welcome to BE. What a great position to be in with multiple options of where to live. One thing you didn't mention is work. Will you need to find a job? If so, the salary can vary greatly depending on the profession and location. You mentioned self-employment, this would hold true for this also.

I can't help you with the comparisons of US v AUS, as I only spent a year in AUS and that was 20 years ago, but you will find the US to be very varied. Climate, cost of living, culture, etc, etc.

Speedwell

Welcome to the forum, whatsnext. I'm not an Aussie but I can speak to some of your concerns.

I'm wondering why California. If I had to move within the US, I would not choose California despite the bulk of my extended family (cousins and whatnot) moving, lemming-like, to the suburbs of Los Angeles thirty years ago. Even then the house prices and cost of living were ridiculous, and now they're appalling.

Yes, the health care. Up until the Affordable Care Act ("Obamacare"), you paid a lot. Since you don't qualify for reduced premiums under ACA if you have adequate coverage through your employer, as I do, little will change in that scenario. However I've heard good things about it from friends who are writers, artists, and self-employed salespeople who don't make much and who certainly don't have an employer to get coverage through. Some of them pay little or nothing in premiums under ACA. My perception is that the seemingly lower taxes we pay in the US as opposed to the UK, for example, are more than offset by the cost of healthcare.

As far as taxes are concerned, in general, I feel like we pay pretty close to the same when you consider what the average taxpayer gets in return. And I live in Texas, which has no state income tax. Property taxes are the second biggest reason (the first being mobility) I live in a large flat in the city instead of a cottage in the country. But naturally you pay the owner's property tax in your rent anyway and you don't have equity to show for it. Self-employment tax simply means that in addition to what you pay as an employee, you also have to cover the portion that the employer normally pays (since they share the cost). If you employed people, you would have to pay this for them.

If you work or have income outside the US after getting citizenship, you do have to tell the US what you make, but it's not as bad as you think unless you're very wealthy. Most if not all of your income that you make outside the US while you are a foreign resident (unless you are paid by a US entity) will fall under a foreign income exclusion anyway and you won't be taxed on it (I think the current figure is around ninety thousand USD before they start assessing tax). You are probably going to be judged as having abandoned your green card anyway after six months of living outside the US, and would have to go through applying for a visa all over again if you wanted to return as a permanent resident. People who have abandoned permanent residency could still be liable for filing tax returns under US law for several years, believe it or not. Giving up citizenship is not that difficult, but doing it to avoid taxes is penalized if you are quite wealthy. Here's a wiki page that explains more about this: http://britishexpats.com/wiki/Taxes_..._IRS_in_London

Here in the city of Houston, rent and house prices and the cost of living are reasonable, jobs comparatively plentiful, and health care among the best available. I've been to Germany on an extended business trip and the prices in shops there were not alarming, but they were significantly higher than here (of course filling the tank in my Audi was a sticker shock). If prices in Australia are that much higher than that (did you mean a third to a half again as much as Germany?) then.... well a friend who lives in Geelong just told me he thinks things are pretty pricey there compared to here in Houston, anyway.

For an older but large and well-laid-out two-bedroom flat with one and a half baths close to Houston's "second downtown", I pay less than 1000USD for rent. My electric bills are absurdly low and I pay for water, trash collection, and city sewer as calculated charges with the rent... so for everything it comes out to about 1100USD. I agree with you that the majority of rental units don't come up to my standards. It is not difficult to find a reasonably-priced free-standing home to rent or buy at a distance from town, though you may quickly get tired of commuting to a city job (at least you don't have the added insult of paying EU prices to fill the tank). Quite a few posters here live in the town of Katy, a half hour or a little more west of the city, and commute in each day.

Anyway I hope that helps.

JAJ

Are you saying that you were originally from Germany and became naturalised Australian citizens? Did you get permission to retain your German citizenship? (Beibehaltungsgenehmigung)


Being selected for further processing doesn't mean you'll get an Immigrant Visa. They select more "winners" than there are visas available. If serious about immigrating, you should have all your documentation prepared and go to visa interview at the first opportunity.


Most developed countries have property taxes to fund local services. In the U.S. property taxes are usually deductible against federal income tax.

When you work for an employer, the employer has to pay 7.65% social security tax on top of your wages, in addition to what the employee pays. So a self-employed person pays both shares. However, half of the 15.3% is tax deductible.


So pick a state without income tax!
If you do pay state income tax, you can normally deduct it against federal income tax.

If you don't like the U.S. tax system then you will save yourself a lot of stress in life by not coming to live in the United States. FBAR reporting, FATCA reporting (form 8938) - not a big deal, just report the relevant assets, and make sure you declare your worldwide income. No different to Australia, where worldwide income is taxable. As far as I am aware, Australia's tax forms also ask about foreign assets, not as detailed as the U.S. does, but that may change.

The United States does tax citizens (and green card holders) who live outside the U.S. It's part of the deal of being an American. And there is an "expatriation tax" on those who renounce American citizenship or long term residence. However Australia also has a departure tax (in the form of a deemed disposal of assets for capital gains purposes) on those citizens/PR who cease tax residence.

If you really want to live in the U.S. and make it your home, the tax issues are quite manageable. If not, perhaps another country would work better.

SanDiegogirl

You seem to be well aware of the main aspects regarding housing, taxing, and cost of living in the US as compared to Australia.

Little point in discussing the good and bad points of the way things are - you either accept them or live somewhere else.

I would think that your main concern would be how you would finance yourself in the US? What work do you do, would you be able to get a job?

You know what costs are involved in the US - the question is would you be able to earn enough to live there?

whatsnext

Awesome and really helpful replies - and thanks for making me feel welcome on this forum!

I will reply to each post, but it's dinner time soon, but I will get to all posts later tonight. - Thanks again!

whatsnext

Thanks Pete. I knooowwww...we are blessed for the options, which includes the chance for the US greencard (expected by Jul or Aug this year).
I mentioned self-employment, because this is my long-term plan. However, there is a good chance that my wife would be taking up a full-time position and I would either start setting up some self-employment income, or do a part-time job on the side (thinking about the changes on the healthcare front, this is one thing that worries me, i.e. that many US employers are said to NOT provide health benefits to parttimers).

whatsnext

Wow...what an awesome post. Thank you so much for the effort you put into your response, much appreciated.

We are actually not sure about California. I think we would love the climate, but not sure about LA...I love water and harbor views, so San Francisco might be nice but perhaps too cold, rainy and foggy for us on too many days of the year (lol). Perhaps San Diego.
But in all honesty, it really looks like an expensive place to live, compared to other areas in the US.

I did realize the other day that there are 'advanced tax credits' available up to certain income levels, that can be applied towards reducing the monthly premiums due. So that might do the trick to get going when the income is still low in the beginning. It obviously doesn't change the fact that health services and premiums are still ridiculous, something I hope will change in the future as they tackle this issue.

Thanks. Some of that info I already knew, but I think there is some rule about having been a permanent resident for at least eight of the past 15 years, but that could be in relation to exit tax. I'll check on your link, too. I want to stress that I am not trying to be too concerned about things that may apply in a future scenario where we might want to live somewhere else, with the option of returning to the US later. But I think these are all very important things to consider. We are now in our early 40's and tread more carefully I guess.

Very useful info. What I meant to say was, our experience with Aussie and German grocery prices is that Woolworth and Coles in Australia (the two main players, apart from more recent entrant, the German ALDI chain) have prices across the board that are at least DOUBLE if not TRIPLE the price you would have to pay in a German grocery store. It is incredibly cheap here in GER to do your grocery shopping! The choice is sick, too! But I didn't want to compare Germany to the USA, rather than the USA to Australia. I don't have much in the way of comparing typical US grocery pricing, as we haven't visited the US much in recent history and can only go by our trip to Florida a year ago.

Michael

As you said, California is very expensive especially for housing and houses are smaller than Florida, Texas, and other places but if you are in hi-tech, there isn't a better place for work opportunities than the Silicon Valley.

Many Silicon Valley companies have very good benefits packages, stock options, and bonuses and usually provide health insurance for dependents. The last company I worked for before retiring had very flexible work hours, telecommuting if desired, and flexible benefits (employee were allocated a specific amount of money to spend on health care, life insurance, etc.). Also for a specific job title, usually there is a very large pay range so if you perform, your base pay can possibly be double or more than employees with the same job title.

whatsnext

Hi, thanks for your post, below my responses.


Yes, we went through the process of getting permission to retain our German citizenship, prior to applying for the Australian citizenship and therefore we do in fact have the 'Beibehaltungsgenehmigung'. We don't think we would have taken up citizenship if it had meant giving up on the European passport.

I know exactly how the DV lottery process works by now. I have been a member of the other forum discussing this topic since we learned that we were selected back in May. We prepared all documents and submitted all visa application forms within less than a week (acknowledged by KCC), in the false belief that it was a matter of 'first come first serve'. Based on our case number and the published cut off numbers for all months between Oct 2013 (start of DV2014 period) to Mar 2014, we expect to be invited in July or August at the latest. Yes, there is a risk that we might be missing out still, but the progress on visa applications and our case number relative to much higher numbers of other hopefuls is making us confident that we will come through with flying colors, should we now decide to go the final mile.



I was not aware of (1 - second sentence) and (3), I knew (2). Thank you.


I think you are confusing two things. I have no issue with being taxed on world wide income, while being a tax resident of any nation. "No different to Australia, where worldwide income is taxable." - that is incorrect, because once you cease being an Australian resident for tax purposes, the only thing that would still be subject to Australian taxation is whatever income source you still have in Australia. Unlike the IRS, the ATO will not be interested in any income you make or assets you hold outside of Australian jurisdiction for as long as you are a foreign resident (Aussie citizen or LPR living overseas). That is the essential difference. No other nation on the planet (other than the USA and an African nation called Eritrea) forces its non-resident citizens or those with legal permanent resident status residing overseas to continue to report on their financial affairs outside of their jurisdiction.

Regarding a 'departure tax' from Australia, from what I read it's not necessarily like that.

I don't actually want the citizenship based tax system thing to dominate our decisions .. because it will not affect us to the degree of not wanting to take up the opportunity of moving to the USA. In fact, it will never affect us if we happen to move and stay in the US forever as our principle place of residence. But there is no denial that there has been a lot of controversy about it (for very good reasons) and how this and FACTA impacts adversely on life by ordinary US expats. I am just going to mention one out of many real life impacts to illustrate how silly and unreasonable this really is: 'Phantom income' (read in the comments section under the article, user John!)

whatsnext

Good points, San Diego girl
I am a sales/marketing person, but currently trying to set up some online income streams from home. My plan is to not depend on a salary job by the time we immigrate, which is why I mentioned self-employment tax and health cover in my OP. We are also cashed up with solid savings, so there is no urgency of having to get a cash flow going through jobs from day one. I guess I am taking a more long term view in trying to picture what the financial side of things could be like, further down the track by living in the US as compared to returning to Australia. I also understand that online resources and other people's shared experience and opinions can only go so far.

JAJ

As far as I am aware, you will have to (successfully) make the same application again if you want to keep German citizenship upon becoming U.S. citizens.

The United States tax system is what it is. As things stand, and it's unlikely to change, while you are a citizen or permanent resident, the tax system follows you worldwide. Expatriation is possible, but if you are a former U.S. citizen or long term permanent resident, there are a range of tax consequences to consider.

If you are not happy with the idea of a lifetime exposure to U.S. tax filing, it may be better not to seek permanent resident status in the United States. If you want to live in the U.S. short term, there may be other options such as the E-3 visa for Australian citizens. You'd still have to pay U.S. tax while resident, but the exit from the U.S. tax system would generally be a lot simpler. On the other hand, you can't stay for lifetime on an E-3.

On the other hand, if you choose not to take up the opportunity of immigrating to the U.S., it may never be available at a future date.

So the decision as to whether or not to proceed is a serious one.

whatsnext

I believe so, yes. That is not a concern at this stage, though.

Tell me about it!!!

Pulaski

That is certainly not true in all cases. As I have stated a number of times, I was losing a substantially higher percentage to income tax and social security tax in the UK than I do here including health insurance in my mandatory deductions. In the UK I was losing approximately 35% to mandatory deductions, here the corresponding figure is about 25% (including health insurance, and the way I pay for health care that also includes copays, and deductibles). Given the changes in UK income tax and social security tax, and the reduction in US income tax under George Bush, I am certain the difference is greater to today that twelve years ago when I left the UK. The last time I posted this, someone else (Bink, I think) posted that he was in the same situation.

Speedwell

I understand, Pulaski. On the whole I still think the UK taxpayer gets a better deal for their money. If I didn't think so, my husband and I would probably not be planning to go back home. I imagine the ratio has a lot to do with how much you make, your family composition, where you live in the US, where you live in the UK, your habits, your health, and your property.