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A financial checklist for relocating to the U.S.


As U.S. companies struggle to find local talent, they continue to import labor from overseas. There are just not enough software engineers, for example, in the U.S. to meet demand and it’s a boom for foreigners eager to have a career in the states. If you’re moving to the U.S., you may be wondering what to do with your money left overseas and what about taxes and insurance? This article serves as a small guide.

First, congrats on your relocation and welcome to the United States. If you move to the U.S. after the first six months of the calendar year, then you may be eligible for non-resident alien tax status.* This is a special type of tax status that can mean no capital gains tax on non-U.S. assets if sold in the same year and no employment taxes on some income as well. Before you know it, you’ll become a tax resident in the U.S. and therefore subject to tax on worldwide income. IRS reporting is complicated and is even more complicated if you still retain income and assets outside of the U.S. The most important thing to consider is relocating your cash and investments to the U.S. as this can significantly reduce tax complexity.

As a U.S. tax resident, you’ll be issued a Social Security number. You’ll need this to open up bank and investment accounts. Meanwhile, any non-U.S. financial institutions may close your accounts once they find out that you’re a U.S. tax resident. This is due to FATCA (Foreign Account Tax Compliance Act)^2 which requires foreign institutions to report the financial activity of U.S. account holders. They only way for them to resist compliance is by closing your account. If you have assets remaining overseas, you might have to report that along with your tax return.

Your new employer might offer a retirement plan, such as a 401(k). These types of accounts allow your employer to contribute to them for your benefit. They also allow you to defer income from taxes; you can contribute $19,500/year, plus $6,000 “catch-up” contributions for people 50+. You can invest your contributions and enjoy tax-deferred growth on the investments. You’ll pay taxes only when you take the money out. If you return home, you may be at the lowest marginal tax rate, which might be a good time to take distributions from the 401(k) then.

Health insurance is required in the U.S. and hopefully, your employer offers it. The least expensive insurance is a high deductible plan and this means that you’ll pay a deductible before any benefits are paid by the insurance company. The deductible is often $6,000 for individuals ($12,000 for families). The most expensive plans are when there is little or no deductible; benefits are immediately paid by the insurance company. A key benefit to high deductible plans is the optional Health Savings account (HSA) that can come with it. This is another tax-deferral strategy where you can contribute $3,500/year ($7,000 for a family), invest it, and enjoy tax-free growth until you spend it.

At Eureka Wealth Management, I help guide those relocating to the U.S. and can manage investments overseas and in the U.S., providing for an easier transition. I also coordinate advice with your tax advisor and plan for your retirement while keeping in mind that you might have plans to return home. Call for a free, initial consultation at (760) 537-0791 or book a meeting online at eurekawealthmanagement.com.

*Consult your tax advisor for specific tax questions.

Sources:

Michael Kitces "Key Tax Considerations When Advising Non-US Citizen Clients" (link)

^2: Eureka Wealth Management: "Why it's difficult for expats to invest" (link)

​Mail: ​8605 Santa Monica Blvd, pmb 35721

West Hollywood, California 90069-4109 US

info@eurekawealthmanagement.com

(760) 537-0791

©2020 BY EUREKA WEALTH MANAGEMENT.

Eureka Wealth Management is a registered investment adviser in the State of California. The adviser may not transact business in states where it is not appropriately registered, excluded or exempted from registration. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment advisory services. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.