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As an American expat you are still liable to pay tax on your worldwide income, albeit with some additional benefits to mainland residents. With the introduction of FATCA, international financial institutions now have to report any US tax-paying clients to the IRS, resulting in burdensome reporting and often unprofitable business. The result being that US expats are now being shunned by many financial institutions leaving it difficult to find advice or support.
Despite the new rules though, there are still many ways you can legally minimise your tax liability, often through the use of Double Taxation Agreements (DTA’s), recognised by the IRS as compliant savings schemes. The use of such schemes in safe jurisdictions can result in greater flexibility over your savings, including access and investment choice along with the massive benefits of Gross Roll-Up or Deferred Taxation. Our handy guide which you can download below, shows you just some of the ways thousands of expats just like you are making their finances FATCA compliant whilst reducing their tax – legally.
At GWM we have prepared for the changes and have trained specialists on hand to advise you of the bespoke options potentially available to you. Supporting our Planners we have US Attorney’s and qualified US Tax Specialists giving you piece of mind that not only are the solutions compliant but are suitable for your immediate and long term financial goals.
All US taxpayers must report all earned and unearned income and worldwide assets every year. On top of this you must also disclose the details of every bank account that you have power of signatory over, if the total value of your overseas bank accounts is in excess of $10,000.
From 2013, the top rate of income tax increased from 35% to 39.6% along with short term capital gains tax and the tax on dividends, whilst long term capital gains tax remained at 20%. Therefore the most basic planning advice would be to structure your investment portfolio to give rise to long term capital gains – rather than short term.
Whilst overseas, US taxpayers can continue to contribute to Individual Retirement Accounts (“IRAs”) back in the US. You have a choice whether to fund a Traditional or Roth IRA and either claim tax relief on the way into the pension – or on the way out as you draw income.
Building up a substantial savings pot is a key priority and best achieved using a wide range of investment opportunities. Such a strategy introduces diversity into a savings plan, which in turn can reduce risk.
It is important not to panic, stop your pension payments or change any investment strategy without reviewing the implications. At present we would recommend supplementing company schemes with savings plans designed for retirement planning, but it is vital to seek professional advice before making any changes.