MIKE COADY

Growth Expert | Business Excellence | People Transformation
Mike Coady was appointed Chief Executive Officer of swissglobal in 2018, a position to which he brings a strong financial background and experience across a variety of roles. Mike is a skilled business strategy and growth leader, coach and motivator. He is a people’s person known for his ability to inspire teams towards excellence. He mentors his people and departments to transform their passion into outstanding results and long-lasting relationships with their clients.
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Moving to the U.S.A.

Mike CoadyExpat Advice Moving to the U.S.A.

Moving to the U.S.A.

For many people throughout the world, moving to the United States is a goal and a dream. Prior to making such a move though, it is essential for a serious amount of pre-planning to take place. The process of legally moving to the U.S. is complex, and it takes time. With a bit of help though, it is possible to make the move successfully.

Many individuals move to the U.S. for retirement, but others do so for work, schooling, or perhaps because family members live there. However, the U.S. guidelines and policies permitting permanent residence in the country are limited, are very different from one need to the next, and must be followed to ensure you have access to the services you desire.

It’s not just about the immigration process

There is, typically, a huge and complex amount of paperwork to complete. There are many steps in which you must prove you should be allowed to move to the country. However, it is not just about documentation. There is also a financial component that the U.S. Immigration Office requires you to meet, and there is a personal financial aspect to the process. Once you have selected how and why you will move to the country, you must ensure that your personal finances are in order. You’ll need planning techniques that not only help you to live the way you desire but also help to reduce your federal and state tax liability. Doing this now, before you arrive in the U.S., is critical to saving money and minimising overall difficulties later. Plan early.

The date matters

One factor to keep in mind is determining the relevant date. Under U.S. tax rules, a residency start date may be a date in the middle of the year, at the start of the year that you moved to the country, or even, most common, not until January 1 of the year following your arrival. It’s important to know that this start date is based on your visa, as well as on other things. For example, a Green Card holder has residence the first day he or she arrives in the U.S. Those who have a work permit visa, on the other hand, may not establish an official residency date for up to six months after arrival. To make things even more confusing, state rules differ from federal rules, making it more complex to determine your date of residency in the U.S. For example, you may be a tax resident in the state without being a tax resident under federal law. Confused? That’s why you will benefit from hiring a professional to handle this process for you.

Understanding U.S. tax methods

In the United States, tax law is complex, with plenty of strategy options available. It’s important to know that the federal government taxes gains on the disposition of property based on the historic book value of the item. Note that if shares are sold the day after arrival, and gains have occurred over the past 10 years, state taxing authorities and the U.S. federal taxing authority, the Internal Revenue Service (IRS), will tax all of that gain.

This can be very expensive. That’s why your deVere Group adviser is likely to encourage you to make some adjustments prior to becoming a U.S. resident. For example, you will need to rebase all of your assets. This means completing a transaction that ‘steps up’ the value of your assets now, before you become a legally recognised resident in the U.S. Other transactions may be advantageous, as well. The goal is to create a new book value specifically as a tool for reducing your tax liability later.

It is also important to consider long-term capital gains. This type of tax structure applies to gains on property held for more than 12 months. Under the U.S. federal taxing laws, this type of gain is taxed at 20 percent. There may also be state taxes that apply. There is also a 3.8 percent tax on long-term gains specifically for Medicare. This applies when the taxpayer’s total income is greater than $250,000.

Keeping this in mind, consider the following very realistic scenario that you, as an individual moving to the U.S., might face.

You may have property that has a historic cost of $200,000. It has a fair market value at the time of your official residence of $1 million. During your U.S. residency, your property appreciates in value to $1.2 million. Under the U.S. tax guidelines, the IRS would tax the $1 million gain of your property. This is what will happen if you do not rebase the value of your property before you take official residency in the U.S. In this scenario, you would pay $238,000 in taxes on that gain.

However, if you were to rebase your property value when you arrive in the U.S., this creates a much better scenario for you. Instead, your IRS tax would be just $47,600.

It’s important to note that this principle may differ but applies to most international assets that you own. In most situations, the IRS does not recognise trusts that have been created and/or funded within five years of arrival in the U.S. This also applies to pension funds. Once you arrive in the United States, pensions may become fully taxable.

What should you do? How can you mitigate these high costs? In short, if you are planning to move to the United States, put down the paperwork regarding the legalities of moving and focus on the financial aspects of the process first.

Before you arrive in the United States, understand that you’ll need to make some pre-planning moves to ensure that you reduce your tax burden as much as possible later. There are methods of reducing your tax liability that a deVere Group financial adviser with specific experience in this area can provide to you.

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