billyeasy

This is a theoretical/naive question. I want to know what I am getting myself into 10 plus years down the road. Exploring all options.

At present, I'm a green card holder, considering moving back to Europe and then the UK.

Lets say I obtain US citizenship before I leave.

Fast forward 15 years down the road, I sell a property in the UK that I inherited for $350k.

To avoid paying capital gains* and because I have no intention of returning to the USA, I renounce my US citizenship. What happens to my US social security?

* Disclaimer - I have have not yet explored capital gains and whether I would need to pay it in both the UK and US.

porkedpie

Citizenship should not impact your SS benefits in this situation, but you can read the full criteria here https://www.ssa.gov/pubs/EN-05-10137.pdf

S Folinsky

You might want to clarify what you mean by the word “for.” If it is the value on the date you inherited, then the $350 is your “basis” for computing capital gains.

billyeasy

Thank you so much.

The ad and its link are useful. Reading through it, it astonishes me how anyone can accurately keep track of all the stipulations one has to report.

billyeasy

This is a theoretical/naive question. I want to know what I am getting myself into 10 plus years down the road. Exploring all options.

At present, I'm a green card holder, considering moving back to Europe and then the UK.

Lets say I obtain US citizenship before I leave.

Fast forward 15 years down the road, I sell a property in the UK that I inherited for $350k.
15 years from now, I inherit a property for $350k or decide to sell my old flat in London i purchased for 60GBP back in the year 2000.

To avoid paying capital gains* and because I have no intention of returning to the USA, I renounce my US citizenship. What happens to my US social security?

* Disclaimer - I have have not yet explored capital gains and whether I would need to pay it in both the UK and US.

billyeasy

Good point.

I am unable to edit my post.

Best I could do was update it by creating a quick reply with my edits.

Fast forward 15 years down the road, I sell a property in the UK that I inherited for $350k.
15 years from now, I inherit a property for $350k or decide to sell my old flat in London i purchased for 60GBP back in the year 2000.

Glasgow Girl

Something else you need to consider is the exit tax which would be applicable if your net worth (including all world wide assets) exceeds $2M. That applies to US citizens renouncing citizenship and long term green card holders abandoning their green card. If you owned two UK properties and one over here that alone could put you close to that limit.

I really don’t understand why you would make the effort to become a citizen if you intend to renounce some years later. Seems like a waste of time and effort. When you dig into capital gains taxes you may find that the CGT due to the UK upon sale of your properties exceeds that due to the US in which case there would be no additional tax due to be being a USC, and in the worst case it is likely to be quite a small additional percentage due to the IRS. There are many things to consider if contemplating becoming a citizen but saving CGT should be way down that list.

Rete

Edits are only available for a limited time after posting, i.e. 10 minutes.

billyeasy

Thanks for the insight into CGT, it is not as bad as I thought it would be. The reason I am thinking about getting US citizenship is if I want to move back to the states down the road. At this juncture, I am exploring all avenues, creating a 'mind map' of sorts of my options and the associated outcome pros and cons.

Jerseygirl

2 hours after posting.

Rete

At this age 2 hours is like 10 minutes!

billyeasy

I assume the exit tax/world wide assets includes savings on both sides of the pond, and retirement funds like 401k, Roths, and my UK private pension?

Glasgow Girl

Pretty much everything and anything that would eventually have been subject to taxation in the US had you remained a long term green card holder or US citizen. The idea being that at the time of expatriation they collect all the taxes that would otherwise have been due over your lifetime.

The $2M threshold is not adjusted for inflation and so captures more and more people as time rolls on. However, if you are married and jointly own assets then you could stretch that limit to $4M, or at least reduce the value of each asset in proportion to ownership. Also the first $866,000 (in 2024) of deemed income subject to the exit tax is excluded from tax so you could escape tax free if you have a decent basis in your assets versus a large potential capital gain and/or future income of any kind. That limit is adjusted for inflation.

if you have been a resident green card holder for more than roughly 8 years then this will apply regardless of whether you become a citizen or not, so may not factor into your decision.

Kingsboy48

I worked in the USA for 5 years on a H1B visa, not even a green card but , now residing in Canada, I get my USA SS and even the $3000USD tax free payment for Covid relief or stimulus. My SS is paid without any deductions from USA but is taxable here in Canada.

EdgeAA

I thought you needed 40 credits (10 years) before you could get any social security benefits?