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To take the oath or not

To take the oath or not

Old Mar 31st 2015, 2:58 pm
  #1  
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Default To take the oath or not

I'm a, just retired, US Permanent resident (16 yrs) & UK citizen with earned pension entitlements (both Gov. and work-related) and investments held in both countries. My wife and I have not decided where to settle (UK, US or both).

My mother, in the UK, may need help for sometime (years). I'm considering taking US citizenship in case of being out of the US on a green card for extended periods and thereby maintain the residency option.

My wife intends to remain 'wholly' British.

I understand that the IRS would tax any income wherever I am but assume the liability is likely to be similar (or possibly higher) if I remain British and am able to retain my green card. Is this a fair assumption?
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Old Mar 31st 2015, 3:04 pm
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Default Re: To take the oath or not

Yes, as a US resident (not necessarily a citizen), you are required to file a tax return. You will not, however, be double-taxed as the UK and US have a treaty in place to avoid this.

The main advantage of being a citizen is the ability to freely move between the two countries without fear of losing status with one or the other. You can, of course, retain British citizenship if you naturalize in the US, despite what the oath says or anyone tells you. The only way you can 'lose British citizenship is if you swear an oath in front of a UK consulate official (on purpose).
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Old Mar 31st 2015, 3:13 pm
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Default Re: To take the oath or not

If your wife does not take on US citizenship she faces the potential for aggravation of a new visa application if she spends enough time out of the US to lose her permanent residence status but wants to return to the US.

If your wife is not a USC but you are, it doesn't mean she escapes US taxes if you want to take the usually beneficial choice of filing jointly.
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Old Mar 31st 2015, 4:27 pm
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Default Re: To take the oath or not

Something to take into consideration is that the marital deduction for assets being passed from a deceased spouse to the remaining spouse, where the remaining spouse is NOT a US citizen, does not apply.

So, if you have a large estate, and your spouse is not a US citizen, then they can expect to pay taxes on that estate when the US citizen spouse dies.

Here is a very brief explanation of how it works:

Estate Planning When You’re Married to a Noncitizen | Nolo.com
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Old Mar 31st 2015, 11:27 pm
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Default Re: To take the oath or not

Great information so far, thanks to all.
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Old Apr 1st 2015, 5:42 am
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Default Re: To take the oath or not

Originally Posted by Theknights
I'm a, just retired, US Permanent resident (16 yrs) & UK citizen with earned pension entitlements (both Gov. and work-related) and investments held in both countries. My wife and I have not decided where to settle (UK, US or both).
The US/UK tax treaty and foreign tax credits given in both US and UK domestic law avoids double taxation.

I always worry when people say they have investments in both the US and the UK as I immediately think of PFIC and distributing funds rules. What investments do you have? Pensions are usually no trouble, but mutual funds can be nasty.
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Old Apr 1st 2015, 1:40 pm
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Default Re: To take the oath or not

nun,
The investments include my 401K which will form a significant part of our income in a few years. This was a major driver for me to apply for citizenship.
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Old Apr 1st 2015, 1:42 pm
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Default Re: To take the oath or not

Originally Posted by Theknights
nun,
The investments include my 401K which will form a significant part of our income in a few years. This was a major driver for me to apply for citizenship.
That's no problem, what investments do you have in the UK?

Also if you become a US citizen the taxation of any UK Government pensions will get more complicated.

Last edited by nun; Apr 1st 2015 at 1:44 pm.
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Old Apr 1st 2015, 2:26 pm
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Default Re: To take the oath or not

nun,
Besides cash savings and some long-term individually held shares we have a rental property in the UK, income from which is included in our US tax return. We've been filing in the US for 16 years.
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Old Apr 1st 2015, 3:49 pm
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Default Re: To take the oath or not

Originally Posted by Theknights
nun,
Besides cash savings and some long-term individually held shares we have a rental property in the UK, income from which is included in our US tax return. We've been filing in the US for 16 years.
OK not too many issues with those either. Sometimes people own UK based investment trusts and endowment mortgages that can greatly complicate US tax filing.

If you become a US citizen and stay living in the US the only change will be to the taxation of your UK Government pensions. You'll be liable to tax on it in the US and the UK, as a US permanent resident it would only be taxable in the UK.

The big change in circumstances will occur if you move back to the UK because you'll have to file as a US citizen. You won't be able to claim tax treaty US tax exemption as an NRA on income from things like IRAs, 401k etc. using W-8BEN. There probably won't be an enormous difference in the amount of tax you pay, it just gets a lot more complicated to pay the correct amounts to the UK and the US.
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Old Apr 2nd 2015, 1:11 pm
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Default Re: To take the oath or not

Looking the other way round, if we return to live in the UK and our green cards are revoked what considerations are there with regard to 401k distributions, other saving/bank accounts and property ownership still held in the US?
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Old Apr 2nd 2015, 1:49 pm
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Default Re: To take the oath or not

Originally Posted by Theknights
Looking the other way round, if we return to live in the UK and our green cards are revoked what considerations are there with regard to 401k distributions, other saving/bank accounts and property ownership still held in the US?
If you're green cards are revoked while in the UK you become an NRA. So your 401k IRA etc are taxed according to you being an NRA and the treaty.
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