US Tax
 

I’m moving with my husband to NC in July on a J1 and J2 visa. I will be teaching and once he has work visa he plans to work for a UK based company. We will be renting out our UK property and an Austrian property. I am looking for a US/UK tax advisor who can help us to get our heads around this.

Re: US Tax
 

Good luck!

Re: US Tax
 

It’s hard to find someone who knows both the UK and US systems in detail, and if you do find such a person you will likely find they charge an arm and a leg and/or they provide very generic advice which is not necessarily best for you. It is probably best to split the task into 3 separate areas and get advice on each one independently.

First, and the most important, is to understand the IRS requirements and consequences associated with owning foreign accounts and investments and to manage such accounts and investments BEFORE you move here. Failing to manage these accounts PRIOR to your move could be very costly from a tax perspective. The UK also has some requirements when you leave the UK to work abroad, they are more straightforward and this link should help. https://www.gov.uk/tax-right-retire-abroad-return-to-uk.

Second, you will need to continue to any report any income derived in the UK to HMRC as you do today. That would include your rental property, but not any income derived in the US. Other than where you send your return, that should be no different than what you do today and therefore you should be able to continue to do that. The link above should help. You will pay tax to the UK if your income exceeds your personal allowance.

Third, once you become subject to US taxes, the IRS will tax you on all income no matter what, how or where it is generated or received. That will include any income from your investment properties in the UK and Austria, as well as any interest, dividends, pensions, etc. You will get credit from the IRS for any tax paid to the UK so your tax bill be the the higher of the two amounts, not the total of the two amounts. Not sure about Austria. If you pay any taxes there, google “double taxation agreement USA Austria” and you should quickly find out. Likely they have a similar agreement so that you will not pay tax twice on the same income. You also must comply with the foreign account reporting requirement on an annual basis, failing to do so can be financially crippling so make sure you understand what these are.

The Foreign account reporting requirements, and consequences of owning such accounts are well documented in this forum. They are commonly referred to as FBAR requirements and FATCA. If you search this forum and google the internet you can find a wealth of information. The reporting itself is actually quite straightforward so long as you do not hold any pooled investments like Unit Trusts, OEICs or Investment Trusts. Those you want to get rid of PRIOR to your move. The day you arrive is too late to avoid major reporting and tax consequences. You best plan is to be your own advocate here. Research these requirements and ask questions on this forum if you need more information. Others who have moved here recently may know of someone in the UK or the US who specialize in this area, but they are few and far between and expensive. Beware of many who advertise on the internet, there are a couple of good ones, but most will give you advice designed to minimize their risk along with a fat fee.

Once in the USA you are probably best to find a good domestic CPA, someone who works independently from the national chains (who really only cater to the run of the mill situation). Someone who provides a more personal service, there are loads of them around and they should be able to handle all the IRS requirements, including the foreign account requirements. Ask them if they are aware of FBAR and FATCA requirements. Renting out a foreign property is not very different from renting out a domestic property from the US point of view. I believe the only difference is that you have to depreciate the property over 40 years versus 27.5 for a domestic property. Reporting the income is the same, as is any profits from a sale, and you can deduct the same expenses. So a good domestic CPA will be able to handle this.

All of this is very daunting when you first start the process, but is manageable when broken down into the separate parts. Do some research based upon the above, and myself and others in this forum will be happy to help as we can.

Re: US Tax
 

Further to the very good advice from Glasgow Girl, above, I don't think she mentioned the tax situation for your husband - while he can continue to work for a company in the UK, he cannot remain on the UK payroll, for two reasons: [1] he isn't liable for UK income taxes and payroll deductions, and [2] he will need to pay US income taxes and payroll deductions. The result of this is that, unless his employer happens to have a US affiliate where he can be added to the payroll, he will need to become an independent contractor, receiving his pay from the UK without income tax and employer's NI deducted and "grossed up" to reflect the employer's NI deductions that the employer would have paid were he on the UK payroll. He will then need to make federal and state income tax payments and SS deduction payments in the US.

One other snippet re rental properties, depreciation is mandatory but is only calculated on the value of the building, not the land on which it sits. It is likely that you don't have that information, but a good rule of thumb is that the land is worth about 20% of the purchase price, though it may be a bit more if, for example the land has redevelopment potential, such as if the land is large enough to be used to build flats if the house was demolished, or it could be worth less if it is impaired in some way, such as subject to coastal erosion. You should also be aware that the US allows the deduction of just about any expense you incur on owning and operating a rental property - insurance, property taxes (if any), repairs, maintenance, management fees, loan interest, depreciation (as noted above), etc. The result of this is that the residual taxable amount of your rental income, and the resulting taxes payable, may seem very low - do not be concerned about that, that is how the US tax code works for rental properties. :)

Re: US Tax
 

Thank you so much for your informative replies. It does sound pretty complicated, but hopefully we’ll get sorted.