Pump62kin

Hi all,

My spouse (UKC) and I (USC) are still residing in the UK, but are planning to move to the USA next summer/autumn.

My spouse is planning to take a lump sum from his UK private pension pot in April 2015, while we are still in the UK. He will do this as his Visa is being processed.

Question: Once he is a resident of the USA, will this UK pension lump sum be taxed by the IRS? (It will be approx £80,000) And/or will he need to declare it on his U.S. tax year forms for 2015?

Thanks for any advice provided.

Pulaski

So long as he files a "dual status" tax return in the US for 2015 his lump sum received while he is resident in the UK will not be taxed by the US IRS. A dual status tax return only taxes his worldwide income from the point he becomes US resident.

nun

Yes, make sure he takes the lump sum before he enters the US. I'm assuming here that he just files in the UK and you are not currently filing a joint US return.

Pump62kin

Thank you Pulaski and Nun for your helpful replies. To answer your question: No, my spouse and I do not file a joint US tax return yet as we're newly married.

JAJ

Although as soon as he uses his Immigrant Visa, he becomes U.S. tax resident at that point. At least for federal purposes - and even if he still remains U.K. resident for a period of time.

Except that it's not possible to file married/joint that way. He will generally have to file married/separate, which has narrower tax bands. So even if the pension lump sum doesn't have a direct tax cost, it may have an indirect cost in that it generally closes off the option of filing married/joint for the first year of U.S. residence.

Michael

The best option, if possible, would be to take the lump sum distribution this year and then there shouldn't be any US tax issues.