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US Tax on Endowment Policy

US Tax on Endowment Policy

Old Apr 17th 2017, 8:35 pm
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Question US Tax on Endowment Policy

Hi,

First post, so hello Been reading for months though, lots of very helpful information.

I'm a UKC with a USC wife (we married in July last year), and are working our way through the CR-1 process. Form DS-261 was submitted 14 April.

So it seems likely that at some point this year, I'll be heading to Houston to join my wife. I own my home which is mortgaged (approx. 30% LTV). I have an endowment policy originally taken out to pay off the mortgage (ha!) which is due to mature in December 2018.

It would appear that, unlike the UK, in the US there will be tax to pay when the policy matures; is that correct?

At this stage, I'm not sure whether to sell the house, or rent it out. Selling would be less of a headache for future tax years, but would keeping it and the mortgage affect the tax treatment of the endowment policy?

Many thanks
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Old Apr 17th 2017, 9:14 pm
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Default Re: US Tax on Endowment Policy

Welcome to BE.

As the Immigration forum is purely for questions about US visas and citizenship...I have moved your thread over to the General US forum.
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Old Apr 18th 2017, 7:13 am
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Default Re: US Tax on Endowment Policy

If you sell the property once you are a US resident, you will have a huge foreign currency gain on repaying the foreign currency mortgage, solely because of the collapse in Sterling over the past year...
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Old Apr 18th 2017, 12:15 pm
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Default Re: US Tax on Endowment Policy

Your endowment policy will get no special treatment by the IRS. They will look through it to the underlying investments and tax those. So you should pay US tax each year on any gains. As Cook_County points out there is also likely to be a large US taxable foreign exchange gain when you pay off the mortgage. You will get to take a capital gains tax allowance for a principal residence if you don't wait too long........but selling the house before you become US resident will make your life much less complicated and avoid the potential for any US tax.
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Old Apr 18th 2017, 8:37 pm
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Default Re: US Tax on Endowment Policy

Thanks for moving it Jerseygirl

Originally Posted by Cook_County View Post
If you sell the property once you are a US resident, you will have a huge foreign currency gain on repaying the foreign currency mortgage, solely because of the collapse in Sterling over the past year...
Thanks, I hadn't considered that! Something else to add to the list of reasons to sell.

Originally Posted by nun View Post
Your endowment policy will get no special treatment by the IRS. They will look through it to the underlying investments and tax those. So you should pay US tax each year on any gains. As Cook_County points out there is also likely to be a large US taxable foreign exchange gain when you pay off the mortgage. You will get to take a capital gains tax allowance for a principal residence if you don't wait too long........but selling the house before you become US resident will make your life much less complicated and avoid the potential for any US tax.
Thanks for that; so the tax due is only on the gains in that tax year? That's useful to know, although the final bonus in 2018 could be a sizeable percentage of the plan value.

Selling the house before becoming resident is quite appealing, but lots to consider there, of course. Less complications and less US tax top the list!
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