Basically what the HEART Taxation Act means for foreign citizens on greencards is that if we stay longer than 8 years that the USA government wants to tax our unrealised capital gains across our entire net worth, even money you might have earned 10-20 years BEFORE you even moved to the USA :(
http://www.mondaq.com/article.asp?articleid=62884
I'm sure that the politicians who passed this knew what they were doing but anyone who employs foreign nationals to provide valuable services for their companies may not understand why people are going to be turning down good jobs to leave the USA before they reach the 8 year limit.
This is going to be a major major problem for USA companies and a brain drain on valuable skill sets.
If you are a foreign national holding a greencard what do you think about this?
If you an employer who has green card staff on your payroll what do you think about this and how are you planning to handle staff leaving your company to go back home (or more likely move to more favourable tax jurisdictions).
Cheers,
Dean
BTW can you believe the irony that fat slob Charlie "tax cheating" Rangel was the author of this bill that is going to drive expats away from the USA, lol bet you the NY Times never prints the irony of that one.
P.S. A couple of worthwhile links to check out;
http://benefitslink.com/articles/guests/washbull080630.html
http://robertschon.wordpress.com/2008/06/24/the-heroes-earning-assistance-and-relief-tax-heart-act
Explanation of $651,000 capital gains threshold - https://www.forbes.com/sites/robertwood/2012/12/01/high-cost-to-go-green-giving-up-a-green-card/#532ef010c08c
One of the best explanations of the entire S. 877A IRS Tax code situation from the view of a Canadian giving up USA citizenship (same position applies to most people having to pay Heart Taxation Act "USA Exit Tax") explains the calculations and implications over 9 different articles - http://www.citizenshipsolutions.ca/2015/04/01/renouncing-us-citizenship-how-the-s-877a-exit-tax-may-apply-to-your-canadian-assets-5-parts/
Difference between a “surrendered”, “relinquished”, and “renounced” U.S. citizenship https://1040abroad.com/faq/renouncing-u-s-citizenship/
A post for Aussies reading this;
https://atlaswealth.com/news/will-you-pay-a-us-exit-tax-because-of-your-green-card/?
Basically If you have a house or an apartment in Sydney and a little bit of Aussie super OR usa 401k....pretty easy to get caught up in the $2m limit....then you have to file/payup.....even though you spent 10-20 years working in Australia to create those assets......the USA IRS has wars to pay for so you are going to pay an exit tax on their ENTIRE value and not just the value that they went up while you lived here.
And keep in mind that if you get caught by "any" of the points pretty much anyone working a tech or finance expat job in NY/SF is going to fall foul of the income limts pretty easily.
(for more see - https://www.irs.gov/pub/irs-pdf/i8854.pdf )
"Definition Of Covered Expatriate
If you expatriated on or after June 17, 2008, the new IRC 877A expatriation rules apply to you if any of the following statements apply.
•Your average annual net income tax for the 5 years ending before the date of expatriation or termination of residency is more than a specified amount that is adjusted for inflation ($151,000 for 2012, $155,000 for 2013, $157,000 for 2014, and $160,000 for 2015).
•Your net worth is $2 million or more on the date of your expatriation or termination of residency.
•You fail to certify on Form 8854 that you have complied with all U.S. federal tax obligations for the 5 years preceding the date of your expatriation or termination of residency"
Hey Dean, do you know what happens if I am on a visa?.. I do agree with you, but how the hell are the USA tax people going to tax your post USA income? what if I lived in Cuba and had a Cuban bank account?
ReplyDeleteAre they going to send in the troops!?
I'm more concerned about capital growth.
ReplyDeleteBasically when you leave the USA they are saying I would need to pay all capital gains tax on Australian property increases in value and stocks/superanuation etc.
This is crazy.
Dean
This country is starting to look like a worse and worse bet all the time anyway.
ReplyDeleteThis kind of thing is ridiculous. If you want my money, you'll have to pry it from my lifeless hands.
Dean,
ReplyDeleteThe Greencard is the route to US citizenship. If you don't want US citizenship, then don't bother with the Greencard (work on another visa). If you get US Citizenship (which is pretty simple after 5 years on a Greencard) then all these tax laws apply any how.
The principle of this act is that if you are using the Greencard as a temporary visa and will walk away from US tax law once it's not convenient for you, then you shouldn't have been on the Greencard in the first place.
As a Greencard holder you are entitled to a lot of benefits that are only otherwise conferred to US citizens - e.g. the right to live and work in the US. But the Greencard is designed to move you to full citizenship - that's the idea.
I'm not sure I see the issue?
Nic.
Nic,
ReplyDeleteThe green card IS NOT just used by people seekign citizenship.
There are a lot of C suite managers whho will prefer to leave the USA than be forced to pay an enormous exit tax and be forced to file for 10 years after they leave the USA.
Like i said I'm not sure if the USA IT industry is ready for the number of people who will be leaving the USA in the 2014 year.
Cheers,
Dean
Well, maybe this is a way for the government to try to move the jobs over to American citizens. It's a double edged sword; yeah it would be great to have those jobs for our citizens, but our education system is based more on making the kids feel good about themselves rather than actually being able to do a job without getting their feelings hurt. So, they really can't fill the jobs because of the lack of education in our country. Maybe if they did this and backstopped it with a big educational push. Sorry to the green card holders but we do need to take care of ourselves first. Unfortunately, we just love to sacrifice all of our industry and everything else to the rest of the world and then wonder why things start falling apart. Good luck to all in the coming years. It's gonna be fun!
ReplyDeleteYour assumption is that the USA could have got to where it is without foreign nationals....
ReplyDeleteImagine 20% of Cisco deciding to go home – now tell me that you really think the company would survive without its foreign national employees.
The issue for the USA tax base is that the employees wont leave the company…they’ll just chose to work from other locations.
I can work anywhere in the world, I just need an internet connection.
The HEART Taxation ACT is going to be the ‘mark’ of the downfall of the USA IT economy. No amount of homegrown education is going to fix that problem.
Cheers,
Dean
Wow, this seems like a catastrophe waiting to happen.
ReplyDeleteWhat can we do at this point?
I ask USA based managers/employers etc if they are aware of it with the view that hopefully they raise it with HR who in turn raise it with the CEO.
ReplyDeleteI expect that a lot of the foreign nationals will choose to leave the USA- but with the internet/remote work practises etc i expect that most will keep their jobs but just work from a different location - this will harm the USA tax base NOT improve it.
Unless the ACT is overturned by the Obama administration before 2014 it will probably be the beginning of the USA becomign a far less desirable place for foreign nationals to come work.
Thanks for the very informative post. This is something I had heard about but I had been unable to find out more. It will indeed affect the decision of many foreigners to stay and work in the US (as if it wasn't hard enough already).
ReplyDeleteNic Fulton is 100% right. If you don't plan on staying in the USA for the rest of your life, DON'T APPLY FOR A GREEN CARD - stay on a visa.
ReplyDeleteAll the HEART act does is extend the rules for US Citizens for Green Card holders. While we may not like these rules, it prevents US people fleeing to tax havens and avoid paying tax to the country that helped them create their wealth.
Sure but dont make it apply retroactively to people who came here under a different set of rules.
ReplyDeleteCan you imagine this Jan when whoever wins the elction wakes up and says we want a one time tax of 15% of everything you've ever earned your entire life INCLUDING property investments, superannuation, 401k's, cars you bought even before you moved to the USA etc.....
Thats the issue i have here.
Luckily for us we can leave before the 8 years is up but a lot of my friends woke up one morning and found themselves in tax handcuffs but because they dont get the right to vote.....they dont get a choice.
I have no issues paying taxes on money i make while working in the USA BUT when you want to tax everything i've save for in my entire life previous to transferring here.......sorry there are better more reasonable countries in the world to live/work in.
Hmm
ReplyDelete