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TaxRobin
TaxRobin, Tax Consultant
Category: Tax
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Experience:  International tax
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My wife and I are UK citizens. The majority of our assets are

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My wife and I are UK citizens. The majority of our assets are based and taxed in the UK however we own a home (generating no income) and car in the USA and have a US bank account (generating next to no income) - we have no other assets or investments in the USA nor do we have any source of income generated in the USA.
We will be in a position to apply for a US Green Card in about 1 year and understand that if we get the Green Card we will have to file a US tax return annually and also declare our UK income and the value of our assets in excess of $50,000.
I understand there is a Double Taxation convention between UK and USA - in view of that what would the financial downside be (if any) for us if, as UK Citizens, we went ahead and applied for our Green Cards?
Submitted: 2 years ago.
Category: Tax
Expert:  TaxRobin replied 2 years ago.
Hello and thank you for allowing me to assist you.
Actually your obtaining a US green card would place you under US and UK taxation but you would be allowed to use any tax treaty provision to avoid double taxation.
Your use of the treaty would depend on your tax residency. If you are resident in the US then the US will allow for a tax credit and if you are resident in the UK the UK would allow for a tax credit for taxes paid.
All that being said, any property you own in one or the other is still going to draw tax obligation in that specific country. this means should you retain property in the UK and move to the US then the property in the UK if used for income would be taxed in the UK and the US. The US would then allow you to use the foreign tax credit and that would reduce the actual US tax on that same income.
It really works better if you are resident in the US because the UK tax rates are higher. The tax credits are generally the lower of the actual tax paid in the foreign country or the amount of tax in the resident country.
Real property in either country when using for rent or if sold is going to be taxable in the property country and the resident country.
Once you receive your Green Card and have been present in the US (even for 1 day) you remain under US reporting rules unless you give up your Green Card. Yes the US will require you declare your accounts even if held abroad and you will be taxed in the US on earnings worldwide.
A green card holder is taxed in the US just like a US citizen.
I know all the above you may have come across already but really it i a matter of claiming the foreign tax credit for US purposes.
TaxRobin, Tax Consultant
Category: Tax
Satisfied Customers: 15032
Experience: International tax
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Customer: replied 2 years ago.

Thank you - I don't think that really answers my question - I should have made it clear that neither our property in the UK or the USA is (or will) be rented - i.e. neither will generate income.

Whilst I understand your point about US tax rates being more attractive than UK rates, as it happens ALL our UK investments are held in either ISA or Personal Pension funds - in short we have very little 'taxable' income and have structured things to ensure we are now both basic rate taxpayers. Because of that it seems to me that we would actually be better keeping our residency here in the UK - which will allow us to maintain the benefit of the tax free ISA accounts and the relatively attractive income options which we will be able to take from the Pension accounts wef April?

In short what I really want to understand is: if we had Green Cards and remained UK residents (simply using the GC's to spend more than 6 months at a time in USA - should we wish to), whilst understanding we will have to file a US tax return to show our income and capital gains in UK, am I correct in thinking that despite filing the US return, in practice we would not actually have to pay anything in the USA because the double taxation treaty with the UK (where any tax would have already been paid) would effectively leave us with a nil to pay balance?

Many thanks

Expert:  TaxRobin replied 2 years ago.
Hello,
If you receive a Green Card and come to the US then yes, you will be required to report your worldwide income. Yes, if you already pay tax in the UK then the rate would be more than enough to cover any US tax on the same income.
The double tax relief does allows for the tax credit if you are taxed in both countries on the same income and as the US rates are lower your US tax liability could realistically be expected to be nil.
Having the Green Card and coming physically to the US makes you liable for reporting.
Customer: replied 2 years ago.

OK - many thanks

Expert:  TaxRobin replied 2 years ago.
You are most welcome.
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