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Sharing some of the tax advice on UK Taxable income!

Sharing some of the tax advice on UK Taxable income!

Old Jan 8th 2016, 3:26 pm
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Looking for tax advice!
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Default Sharing some of the tax advice on UK Taxable income!

Hi All, i hope that the following info will help some of you.
OK as some of you may know I am looking to move my family to Northern California this year on what will probably be a form of L1 visa.

My main issue is that I have a UK business and I and my wife receive a salary from it, as well as a few other financial investments and the US operates a global tax system.

So my findings on this so far;
As of 183 days of stay per year in the US you become a resident alien.
The IRS also look at the two previous years stay on application (this includes holidays) and take one third of the first years stay and one sixth of the second. This means you could be subject to tax in the first year of entry even if you moved in September for example IE paying a sum in the first January.
At this point all world wide income becomes taxable at the percentage of the State that you are in which is also at the % bracket you have entered for the State due to level of earning you have received. As you probably already know the State tax % is increased the more you earn. This excludes the 6 States with no State tax such as Texas.
You do however receive a tax credit from the US on the tax that you have already paid in the country that it was processed/received. IE if you are at 22% in the UK you get a 22% credit against the Fed/State percentage you will be charged. You then get to pay the difference if there is one from the country you are paid from to the state you are resident in.
Once you stop residing for more than 183 days in the US you stop paying tax to the US on world wide income but you continue to be taxed on anything you have remaining in the US.
This becomes more complicated when Greencards are applied for and is a minefield apparently if you apply for Citizenship.
For housing;
If you own a property but do not live in it, you can sell and pay no tax on the gain made on the condition you invest all of the gain back into another property. You must have the new house to be purchased agreed within 45 days and complete/exchange within 6 months. I think this is called a 1031, some explain it as Life Time Exchange.
If you live in the property and sell within 24 months you pay the standard Fed/State tax. After 24 months you receive $250k of gain tax free per individual owner, IE $500k per married couple.
I have been given the impression that mortgage Interest and Tax can be claimed back but I am still waiting for this to be confirmed!
There is also a depreciation that can be processed at year end which I do not understand at present.

Hope this helps guys!
Regards
Alvin

PS PLEASE BEAR IN MIND I AM MERELY TRYING TO SHARE WHAT I HAVE BEEN TOLD SO FAR IN THE HOPE THIS CAN HELP SOMEONE ELSE BEFORE THEY JUMP IN.
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Old Jan 8th 2016, 3:41 pm
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Default Re: Sharing some of the tax advice on UK Taxable income!

TL/DNR .... In fairness, I made it through the first few lines.

If you arrive on a work visa you are a resident alien subject to US taxes on arrival. The "concession" you get is a "split year" treatment in the year you arrive, only paying US taxes on global income and gains from the date you arrive, not the whole year, but you lose out on the deductions (personal allowances).

Oh, and near the end, a 1031 exchange is something you can only do with the use of a bank/ trustee intermediary, you can't just "roll the gain" like you can with capital gains in the UK. It's a lot more involved and of course expensive with the various bank and lawyers fees.

Last edited by Pulaski; Jan 8th 2016 at 3:46 pm.
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Old Jan 8th 2016, 5:22 pm
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Default Re: Sharing some of the tax advice on UK Taxable income!

Originally Posted by Vanes View Post
As of 183 days of stay per year in the US you are considered a resident for tax purposes by the IRS.
FIFY!
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Old Jan 10th 2016, 2:23 pm
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Default Re: Sharing some of the tax advice on UK Taxable income!

Originally Posted by Vanes View Post
My main issue is that I have a UK business and I and my wife receive a salary from it, as well as a few other financial investments and the US operates a global tax system.

You do however receive a tax credit from the US on the tax that you have already paid in the country that it was processed/received. IE if you are at 22% in the UK you get a 22% credit against the Fed/State percentage you will be charged. You then get to pay the difference if there is one from the country you are paid from to the state you are resident in.
If you are a US resident the US is your primary tax authority. In most circumstances you pay them first and then claim a tax credit for any tax due in another country. The US/UK tax treaty is vital in this.
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Old Jan 11th 2016, 4:32 pm
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Default Re: Sharing some of the tax advice on UK Taxable income!

WRT "I have been given the impression that mortgage Interest and Tax can be claimed back but I am still waiting for this to be confirmed!"

It cannot be claimed back, however the mortgage interest is paid from your gross income, thereby reducing your income before it is taxed. For example, your gross income is $100, mortgage interest is $10, your adjusted gross income is $90 and that's what you are taxed on.
There are a few other things which can adjust your income, some listed here: https://en.wikipedia.org/wiki/Adjusted_gross_income
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Old Jan 11th 2016, 8:00 pm
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Default Re: Sharing some of the tax advice on UK Taxable income!

Originally Posted by mindscrash View Post
WRT "I have been given the impression that mortgage Interest and Tax can be claimed back but I am still waiting for this to be confirmed!"

It cannot be claimed back, however the mortgage interest is paid from your gross income, thereby reducing your income before it is taxed. For example, your gross income is $100, mortgage interest is $10, your adjusted gross income is $90 and that's what you are taxed on. .....
Unlike in the UK, in the US your "personal allowance" is an alternative to listing your itemized deductions from your gross income, so it is quite possible that someone in the US with a moderate mortgage at low interest rate might effectively have no interest to deduct, because the interest is less than their "standard deduction", and they'll pay less tax taking a standard deduction than itemizing their deductions.
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