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January 18, 2017

Expats... Go w to Get Away From California Tax Man Successfully

It is often very difficult to give up your California tax residency and obligation to file a California tax return even though you move abroad and no longer live in California. LEARN MORE ABOUT THOSE RULES HERE.     You may need help getting out of California tax. We can help. Email us at ddnelson@gmail.com for help.


Situations Where Foreign you Income Expat Exclusion Will NOT WORK!

 It is now becoming difficult to use the physical presence test to secure the $101,000 expat foreign earned income exclusion. That test requires you are abroad working for at least 330 days during any 12 month fiscal period. Now the courts and IRS are requiring that you actually obtain a tax domicile abroad to successfully use this rule. READ MORE HERE.

If you are using this foreign earned income exclusion best you read IRS publication 54 and seek the advice of expatriate tax experts or have your return prepared by an expert on these laws. Write us at ddnelson@gmail.com 



January 13, 2017

IRS Makes it Costly to Make a Late Flow Through or Disregarded Entity Election if Not Filed TImely for Foreign Entities

It is becoming very expensive to get a private letter ruling from the IRS.  This ruling procedure is required when you wish to make a late election to treat a foreign entity as a "flow through entity." The new fees (which are also applicable to other IRS private rulings are below:
Rev. Proc. 2017-1.  includes the new user fees for seeking relief under Treas. Reg. §301.9100 ("9100 relief").  A taxpayer might seek 9100 relief in order to make a late election, such as a late entity classification election (also known as a “check-the-box election”) on Form 8832.
The new IRS fees are effective for requests received after February 1, 2017.  The amount of the user fee depends on the gross income of the taxpayer:
  1. Taxpayers with gross income of under $250,000 will have a 9% increase --- from $2,200 to $2,400
  2. Taxpayers with gross income greater than $250,000 and less than $1 million will have a 17% increase --- from $6,500 to $7,600
  3. Taxpayers with gross income greater than $250,000 and less than $1 million will have a 2% increase --- from $9,800 to $10,000
Best to make the election in a timely manner. Read the instructions to form No.  8832  which is filed to make the "check the box" election for both domestic and foreign business entities.  Failure to make the election can result in some situations in adverse US tax consequences.  Email us at ddnelson@gmail.com if you need assistance or wish to discuss.

January 11, 2017

New Due Date For Form 114 (fbar) for 2016 Tax Year

The new annual due date for filing Reports of Foreign Bank and Financial Accounts (FBAR) for foreign financial accounts is April 15.  This date change was mandated by the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, Public Law 114-41 (the Act).  Specifically, section 2006(b)(11) of the Act changes the FBAR due date to April 15 to coincide with the Federal income tax filing season.  The Act also mandates a maximum six-month extension of the filing deadline.  To implement the statute with minimal burden to the public and FinCEN, FinCEN will grant filers failing to meet the FBAR annual due date of April 15 an automatic extension to October 15 each year.  Accordingly, specific requests for this extension are not required.  (Please note: The due date for FBAR filings for foreign financial accounts maintained during calendar year 2016 is April 18, 2017, consistent with the Federal income tax due date.) 

January 7, 2017

Foreign Housing Exclusion or Deduction

In addition to the foreign earned income exclusion, you can also claim an exclusion or a deduction from gross income for your housing amount if your tax home is in a foreign country and you qualify for the exclusions and deduction under either the bona fide residence test or the physical presence test.

The housing exclusion applies only to amounts considered paid for with employer-provided amounts, which includes any amounts paid to you or paid or incurred on your behalf by your employer that are taxable foreign earned income to you for the year (without regard to the foreign earned income exclusion). The housing deduction applies only to amounts paid for with self-employment earnings.

Your housing amount is the total of your housing expenses for the year minus the base housing amount. The computation of the base housing amount (line 32 of Form 2555) is tied to the maximum foreign earned income exclusion. The amount is 16% of the maximum exclusion amount (computed on a daily basis), multiplied by the number of days in your qualifying period that fall within your tax year.

Housing expenses include your reasonable expenses actually paid or incurred for housing in a foreign country for you and (if they lived with you) for your spouse and dependents. Consider only housing expenses for the part of the year that you qualify for the foreign earned income exclusion.

Housing expenses do not include expenses that are lavish or extravagant under the circumstances, the cost of buying property, purchased furniture or accessories, and improvements and other expenses that increase the value or appreciably prolong the life of your property.

You also cannot include in housing expenses the value of meals or lodging that you exclude from gross income (under the rules for the exclusion of meals and lodging), or that you deduct as moving expenses.

Also, for purposes of determining the foreign housing exclusion or deduction, your housing expenses eligible to be considered in calculating the housing cost amount may not exceed a certain limit. The limit on housing expenses is generally 30% of the maximum foreign earned income exclusion, but it may vary depending upon the location in which you incur housing expenses. The limit on housing expenses is computed using the worksheet on page 3 of the Instructions for Form 2555.

Additionally, foreign housing expenses may not exceed your total foreign earned income for the taxable year.  Your foreign housing deduction cannot be more than your foreign earned income less the total of your (1) foreign earned income exclusion, plus (2) your housing exclusion.

Although the foreign housing exclusion and/or the deduction will reduce your regular income tax, they will not reduce your self-employment tax.

Your housing expenses may not exceed a certain limit. The limit on housing expenses varies depending upon the location in which you incur housing expenses. The limit on housing expenses is computed using the worksheet on page 3 of the Instructions for Form 2555.
The foreign housing exclusion or deduction is computed in parts VI, VIII, and IX of Form 2555. Please refer to the Instructions for Form 2555 and chapter 4 of Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.

Need help with your expat return?  Email us at ddnelson@gmail.com

December 30, 2016

Don’t Miss Filing Deadlines Related to Foreign Income and Assets or These Great Informational Videos


All U.S. citizens and residents (green card holders) must report worldwide income on their federal income tax return. If you lived outside the U.S. on the regular due date of your tax return, the extended filing deadline for your 2016 tax return is Monday, June 15, 2017.  Similarly, the deadline to report interests in certain foreign financial accounts is the same as your tax return (with some exceptions). Here are some important tips to know if these reporting rules apply to you:
• FATCA Requirements.  FATCA refers to the Foreign Account Tax Compliance Act. In general, federal law requires U.S. citizens and resident aliens to report any worldwide income. You must report the existence of and income from foreign accounts. This includes foreign trusts, banks and securities accounts. In most cases you must report the country where each account is located. To do this file Schedule B, Interest and Ordinary Dividends with your tax return.
You may also have to file Form 8938, Statement of Special Foreign Financial Assets with your tax return. Use the form to report specified foreign financial assets if the aggregate value of those assets exceeds certain thresholds. See the form instructions for details.
• FBAR Requirements.  FBAR refers to Form 114, Report of Foreign Bank and Financial Accounts. If you must file this form you file it with the Financial Crimes Enforcement Network, or FinCEN. FinCEN is a bureau of the Treasury Department. You generally must file the form if you had an interest in foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2014. This also applies if you had signature or other authority over those accounts. You must file Form 114 electronically. It is available online through the BSA E-Filing System website. The FBAR filing requirement is not part of filing a tax return. The deadline to file Form 114 is June 30.
• View the IRS Webinar.  You can get help and learn about FBAR rules by watching the IRS webinar on this topic. The title is “Reporting of Foreign Financial Accounts on the Electronic FBAR.” The presentation is one hour long. You can find it by entering “FBAR” in the search box of the IRS Video Portal home page. Topics include:
o FBAR legal authorities
o FBAR mandatory e-filing overview
o Using FinCEN Form 114; and Form 114a
o FBAR filing requirements
o FBAR filing exceptions
o Special filing rules
o Recordkeeping
o Administrative guidance
You can access IRS forms, videos and tools on IRS.gov at any time.
Additional IRS resources:
IRS YouTube Videos – International Taxpayers:
Our firm has specialized in expat, nonresident and international tax returns for over 30 years. Need help or further explanation, or your return prepared, contact us.  Email us at ddnelson@gmail.com or visit our website at www.TaxMeLess.com .  

December 21, 2016

2016 Year End Tax Planning Letter from Kauffman Nelson LLP, Certified Public Accountants

As 2016 comes to an end, it is a good time to think of planning moves that will help lower your tax bill for this year and into the future.
Consider the following items when looking at your personal tax planning:
  1. Make use of tax deferral strategies using retirement plans - Maximize 401(k) contributions, IRA contributions, or (if applicable) plans you have set up for your small business.  There are special rules on making IRA contributions for expats so ask us if you are unfamiliar with those rules.
  2. Reduce your taxable income in 2016 – maximize itemize deductions (such as charitable contributions), consider purchases for your business which could be a Section 179 deduction in 2016, etc.
  3. Consider making tax payments before April 18, 2017 if you plan to extend your filing.  This can avoid penalty and interest charges.
Big Change for FBAR (foreign bank account) reporting
For those of you subject to foreign bank account reporting (i.e. those who have non-US bank accounts in excess of $10,000 in aggregate during 2016), the initial deadline for Form 114 has changed from June 30 to April 15 (June 15 for expats).  Extensions are now allowed for this form similar to tax return extensions but FinCen has announced the October 15 extension for the FBAR will be automatic.  More information here:  http://www.thetaxadviser.com/news/2016/dec/fbar-automatic-extension-201615731.html
Other Deadline Changes
Starting in 2016 certain tax return due dates have changed for calendar year businesses:
  1. Partnerships have changed from April 15 to March 15
  2. C Corporation due dates changed from March 15 to April 15
New Administration – possible changes for future years
The new administration has proposed collapsing the current seven tax brackets (currently there is a top rate of 39.6%) to three brackets:


Tax rate
Married filing joint
Single
12%
Less than $75,000
Less than $37,500
25%
$75,000–$225,000
$37,500–$112,500
33%
More than $225,000
More than $112,500


Further proposed changes to basic individual taxation are:
  • Personal and dependent exemptions would be eliminated
  • The head of household filing status would be eliminated; and
  • The standard deduction would be increased to $30,000 to joint filers, and $15,000 for single filers (this may significantly reduce the number of taxpayers who itemized deductions).
Stay tuned for more information when actual legislation comes into effect.


2016 tax rules – a quick review
Income tax rates — Range from 10% to 35% unless taxable income exceeds $415,050 for singles or $466,950 for married couples. Rate on income above those amounts is 39.6%.
2016 foreign earned income exclusion – up to $101,300 of 2016 foreign earned income
2016 foreign housing exclusion – A certain amount of your housing costs (over a base amount of $16,208) can be excluded if you qualify for this exclusion.  Generally, you can consider up to $30,390 in rent and utility costs.  There are certain “high cost” locations where you can potentially deduct a higher amount.  Those can be found near the end of this link:  https://www.irs.gov/pub/irs-pdf/i2555.pdf
Gift tax — Annual tax-free gifts allowed with $14,000 per gift limit. Gifts to non-resident alien spouse of up to $148,000 are not considered a reportable gift.
Breaks now permanent — 1) optional deduction for state and local sales tax in lieu of state and local income tax; 2) the $250 deduction for classroom supplies paid by teachers; and 3) IRA-to-charity transfer of up to $100,000 by taxpayers 70½ or older.
Itemized deductions — Limited for single taxpayers with adjusted gross income (AGI) above $259,400 and married couples with AGI above $311,300.
Alternative minimum tax — Exemption amount for 2016: $53,900 for singles; $83,800 for married filing jointly.
Business expensing — Up to $500,000 for new and used equipment and 50% bonus depreciation for new assets.
Personal exemptions — Phased out for singles with AGI above $259,400 and marrieds with AGI above $311,300.
Capital gains & dividends — Long-term gains taxed at 15% for most taxpayers. Zero percent for those in 10% and 15% ordinary income brackets; 20% for those in 39.6% ordinary income bracket.
Medicare tax on earned income — Medicare surtax of 0.9% imposed on wages and self-employment income exceeding $200,000 for singles and $250,000 for married couples.
Net investment income tax — A 3.8% tax imposed on unearned income for singles with modified AGI exceeding $200,000 and for couples with modified AGI exceeding $250,000.
We look forward to working with you on your 2016 taxes. DOWNLOAD YOUR 2016 EXPATRIATE TAX RETURN QUESTIONNAIRE HERE (Get started early)

2016 FBAR (form 114) Gets an Automatic Extension of Time to File for 2016

The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) announced that, to implement the new due date for FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR), of April 15 (April 18 for 2017), it will automatically grant all taxpayers filing the form a six-month extension every year to Oct. 15 (which will be Oct. 16, 2017, because Oct. 15 is a Sunday). FinCEN explained that this six-month extension will be automatic each year and that taxpayers do not have to request extensions.
Section 2006(b)(11) of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, P.L. 114-41, changed the due date of FBARs to April 15 to coincide with the due date for individual income tax returns. Before the change, the form was due on June 30, a date that did not coincide with any other individual income tax return deadline, and no extensions were allowed.
The Bank Secrecy Act, P.L. 91-508, and its regulations require FBAR reporting from “[e]ach United States person having a financial interest in, or signature or other authority over, a bank, securities, or other financial account in a foreign country” (31 C.F.R. §1010.350(a)), if the aggregate maximum values in that person’s foreign accounts exceed $10,000 at any time during the calendar year (31 C.F.R. §1010.306(c)).
- See more at: http://www.thetaxadviser.com/news/2016/dec/fbar-automatic-extension-201615731.html#sthash.4xTfczcV.dpuf

December 2, 2016

Expats and Nonresidents - Amend your Return If Original is not Correct- Easy to Avoid IRS Problems

If there are items of income or expenses, or specialized offshore reporting forms, missing from your tax return it is best to file an amended tax return. If you do not amend to correct errors (in your favor or not) and the IRS discovers the problem first, you risk severe penalties, interest and possible criminal prosecution. The amendment process is simple as described below.

1. When to amend.  You should amend your tax return if you need to correct your filing status, the number of dependents you claimed, or your total income. You should also amend your return to claim tax deductions or tax credits that you did not claim when you filed your original return. The instructions for Form 1040X, Amended U.S. Individual Income Tax Return, list more reasons to amend a return.

2. When NOT to amend.  In some cases, you don’t need to amend your tax return. The IRS usually corrects math errors when processing your original return. If you didn’t include a required form or schedule, the IRS will send you a notice via U.S. mail about the missing item.

3. Form 1040X.  Use Form 1040X to amend a federal income tax return that you filed before. Make sure you check the box at the top of the form that shows which year you are amending. Since you can’t e-file an amended return, you’ll need to file your Form 1040X on paper and mail it to the IRS.
Form 1040X has three columns. Column A shows amounts from the original return. Column B shows the net increase or decrease for the amounts you are changing. Column C shows the corrected amounts. You should explain what you are changing and the reasons why on the back of the form.

4. More than one year.  If you file an amended return for more than one year, use a separate 1040X for each tax year. Mail them in separate envelopes to the IRS. See "Where to File" in the instructions for Form 1040X for the address you should use.

5. Other forms or schedules.  If your changes have to do with other tax forms or schedules, make sure you attach them to Form 1040X when you file the form. If you don’t, this will cause a delay in processing.

6. Amending to claim an additional refund.  If you are waiting for a refund from your original tax return, don’t file your amended return until after you receive the refund. You may cash the refund check from your original return. Amended returns take up to 16 weeks to process. You will receive any additional refund you are owed.

7. Amending to pay additional tax.  If you’re filing an amended tax return because you owe more tax, you should file Form 1040X and pay the tax as soon as possible. This will limit interest and penalty charges.

8. When to file.  To claim a refund file Form 1040X no more than three years from the date you filed your original tax return. You can also file it no more than two years from the date you paid the tax, if that date is later than the three-year rule.


If you need assistance amending your return to make corrections, add forms 8865, 5471, 8621, or other foreign entity and asset reporting forms contact us at ddnelson@gmail.com or phone US 949-480-1235.

November 21, 2016

YEAR-END MOVES FOR THOSE WHO BELIEVE PRESIDENT-ELECT TRUMP WILL CUT THEIR TAXES NEXT YEAR


President Elect Trump has promised to make some major changes in the tax law next year. If you thnk that will happen there may be some steps you need to take before year end.
Defer income to 2017. The Trump tax plan would feature three tax brackets instead of current law's seven, and a top tax rate of 33% instead of current law's 39.6%. If Congress approves this reduction next year you may want to defer income into next year..
The standard year-end tax-savings wisdom always has been to defer income, where possible, into the coming year. This standard approach would make even more sense for middle and upper income taxpayers if the Trump tax plan prevails over others in Congress, and goes into effect for tax year 2017.
Here are some of the ways to defer income until 2017:
  • An employee who believes a bonus may be coming his way may be able to request that his employer delay payment of any bonus until early in the following year. For example, if a bonus would normally be paid on Dec. 15, 2016, an employee may ask the employer before Dec. 15 to defer any bonus coming his way until Jan. 2, 2017. By deferring the bonus, the employee will succeed in having it taxed in 2017. But note that if an employee waits until a bonus is due and payable to request a deferral, the tax on the bonus will not be deferred. Also, if the deferral extends beyond 2-½ months after the close of the tax year, the bonus will be treated as nonqualified deferred compensation (currently includible in income to the extent not subject to a "substantial risk of forfeiture" if the arrangement fails to meet certain distribution, acceleration of benefit, and election requirements).
  • Income that a cash basis taxpayer earns by rendering services isn't taxed until the client, patient etc., pays. If the taxpayer (e.g., consultant, business person, medical professional) holds off billing until next year—or until so late in the year that no payment can be received in 2016—he will succeed in deferring taxable income until next year.
  • Defer "first year" required minimum distributions (RMDs) from an IRA or 401(k) plan (or other employer-sponsored retirement plan). RMDs from IRAs must begin by April 1 of the year following the year a taxpayer reaches age 70-½. That start date also applies to company plans, but non-5% company owners who continue working may defer RMDs until April 1 following the year they retire. Although RMDs must begin no later than April 1 following the year in which the IRA owner attains age 70-½, the first distribution calendar year is the year in which the IRA owner attains age 70-½. Thus, if a taxpayer turns age 70-½ in 2016, he can delay the first required distribution to 2017, but if he does so, there will have to take a double distribution in 2017—the amount required for 2016 plus the amount required for 2017. Delaying 2016 distributions to 2017 thus will bunch income into 2017, but that would be beneficial if the taxpayer winds up in a substantially lower bracket that year.
  • Defer a traditional IRA-to-Roth IRA conversion until 2017. Such a conversion generally is subject to tax as if it were distributed from the traditional IRA or qualified plan and not recontributed to another IRA. Thus, a taxpayer who plans to make such a conversion should defer doing so if he believes the conversion will face a lower tax next year.
Defer property sales. The President-elect's plan to repeal the Affordable Care Act ("Obamacare") also would repeal the 3.8% surtax on investment income. This surtax applies to the lesser of
  1. Net investment income or
  2. The excess of modified adjusted gross income (MAGI) over the threshold amount ($250,000 for joint filers or surviving spouses, $125,000 for a married individual filing a separate return, and $200,000 for other taxpayers).
As a result, if the surtax is repealed for 2017, taxpayers within the reach of the surtax, and are contemplating the sale of property that would generate a large investment gain, would benefit by deferring the sale until next year (assuming of course that the sale price would stay more or less the same).
If the sale can't be postponed, it may be possible to structure the deal as an installment sale. By making a sale this year with part or all of the proceeds payable next year or later, a non-dealer seller to whom the installment method applies becomes taxable in any year on only that proportion of his profit which the payments he receives that year bear to the total sale price. If the 3.8% surtax is repealed for tax years beginning after 2016, the profit on the post-2016 installment payments would escape the surtax. Note that the Trump tax plan would keep current law's maximum tax rate of 20% of capital gains.
On the deduction side. Itemized deductions produce no tax savings for a year in which a taxpayer claims the standard deduction, and many more taxpayers would claim the standard deduction under President-elect Trump's tax plan. It calls for a dramatically increased standard deduction: $30,000 for joint filers (up from $12,600 for 2016) and $15,000 for singles (up from $6,300). If the boosted standard deduction makes it into law for 2017, many taxpayers who itemize under current law and wouldn't be able to under the Trump plan would be better off accelerating next year's itemized deductions into this year, when they will generate a tax savings. And, even if the standard deduction proposal is watered down, itemized deductions still will be more valuable to a taxpayer this year than next if he expects to be in a lower marginal tax bracket in 2017.

November 12, 2016

VALUE OF ON CAMPUS OR NEARBY HOUSING PROVIDED BY EDUCATIONAL INSTITUTIONS TO EMPLOYEES MAY BE TAX EXEMPT


IRC, Title 26, Section 119(d) provides an exception from taxable income for employees of educational institutions who are provided qualified campus housing, which is defined as lodging provided to the employee, spouse or a dependent by or on behalf of the institution for use as a home located on or near campus. In contrast to other employer-provided housing, campus housing does not have to be furnished for the convenience of the employer or as a condition of employment in order to be excluded from wages.
    In general, the value of residential housing furnished by a school to one of its employees is excludable from wages, provided the housing is located on or near campus and the employee pays rent during the calendar year that equals or exceeds 5% of the fair market value of the housing.
If the employee does not pay rent equal to at least 5% of the housing's fair market value, then the difference between the rent paid and the lesser of (1) 5% of the fair market value of the housing and (2) the average rental paid by individuals (other than students or employees) for comparable housing provided by the school is includable in the employee's taxable wages.
     

TIPS ON RENOUNCING YOUR US CITIZENSHIP FROM FORBES MAGAZINE.


We have assisted and represented well in excess of one hundred expats with the tax and legal aspects of surrendering their US citizenship  or long term green card with great success.  Want to discuss the rules and put together a strategy for your surrender.  Contact us to set up a mini consultation to discuss by skype or by phone. Most clients have discovered it is less complex than they believed.  Email us at ddnelson@gmail.com or call US 949-480-1235.

Expats - Eight Tips to Determine if Your Gift is Taxable and requires you to file a Gift Tax Return


If you gave money or property to someone as a gift, you may owe federal gift tax. Many gifts are not subject to the gift tax, but the IRS offers the following eight tips about gifts and the gift tax.
Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you make a gift to someone else, the gift tax usually does not apply until the value of the gifts you give that person exceeds the annual exclusion for the year. For 2011 and 2012, the annual exclusion is $13,000.
Gift tax returns do not need to be filed unless you give someone, other than your spouse, money or property worth more than the annual exclusion for that year.
Generally, the person who receives your gift will not have to pay any federal gift tax because of it. Also, that person will not have to pay income tax on the value of the gift received.
Making a gift does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than deductible charitable contributions).
The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. The following gifts are not taxable gifts:
• Gifts that are do not exceed the annual exclusion for the calendar year,
• Tuition or medical expenses you pay directly to a medical or educational institution for someone,
• Gifts to your spouse,
• Gifts to a political organization for its use, and
• Gifts to charities.
You and your spouse can make a gift up to $26,000 to a third party without making a taxable gift. The gift can be considered as made one-half by you and one-half by your spouse. If you split a gift you made, you must file a gift tax return to show that you and your spouse agree to use gift splitting. You must file a Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, even if half of the split gift is less than the annual exclusion
You must file a gift tax return on Form 709, if any of the following apply:
• You gave gifts to at least one person (other than your spouse) that are more than the annual exclusion for the year.
• You and your spouse are splitting a gift.
• You gave someone (other than your spouse) a gift of a future interest that he
or she cannot actually possess, enjoy, or receive income from until some time in the future.
• You gave your spouse an interest in property that will terminate due to a  future event.
You do not have to file a gift tax return to report gifts to political organizations and gifts made by paying someone’s tuition or medical expenses.
Remember, if you received gifts equal to $100,000 US or more in one year from a nonresident of property located outside of the US, you as recipient must report the gift on form 3520.

August 10, 2016

Estate and Gift Tax Planning for US Nonresidents with US Real Estate and Other US assets

Nonresidents are taxed differently on their property located in the USA than those who are citizens or permanent residents.  They do not get the same exemptions and credits and can without proper planning end up paying a lot of estate or gift taxes.

The table below shows when the IRS considers US property owned by nonresidents to be subject to estate taxes (paid upon death of the nonresident) and gift taxes (when US property and assets are transferred without consideration) during the nonresidents life.
                                                                                   ESTATE TAX                     GIFT TAX

Estate Tax Gift Tax
Property Type Yes No Yes No
Tangible Personal Property in U.S. (e.g., artwork, jewelry) X
X
Currency in U.S. Safe Deposit Box X
X
Cash Deposits in a U.S. Bank
X X
U.S. Real Estate X
X
Non-U.S. Real Estate
X
X
U.S. Stocks X

X
Non-U.S. Stocks
X
X
U.S. Government and Corporate Bonds
X
X
U.S. States/Muni Bonds X

X
U.S. Partnership/LLC Interest Depends (a)

X
Retirement Plans
X N/A
Life Insurance Cash Value X

X
Life Insurance Death Benefits
X
X

(a) The law is not clear and interpretations go both ways with respect to US situs of assets and situs of acutal partnership or LLC interest.

The table below shows the differences between estate and gift taxes paid by a citizen or permanent resident from that which is paid by a nonresident (NRA) including tbe differences in exemptions, and other rules.


U.S. Person NRA
Estate Tax Exemption Amount $5,430,000 per person $60,000 per person
Top Estate and Gift Tax Rate 40% 40%
Lifetime Gift Tax Exemption Amount $5,430,000 per person $0
Annual Gift Tax Exclusion Amount $14,000 per donee $14,000 per donee
Gift Splitting Between Spouses Yes, if both spouses are U.S. people No
Marital Deduction for Lifetime Gifts Unlimited if recipient spouse is a U.S. citizen $147,000 per year if recipient spouse is a non-U.S. citizen4
Marital Deduction for Testamentary Bequests Unlimited if recipient spouse is a U.S. citizen $0, if recipient spouse is a non-U.S. citizen, unless assets are held in a Qualified Domestic Trust
Gift Tax Exclusion for Direct Payment of Medical and Education Expenses Yes Yes
Portability of Decedents Exemption Yes No


If you are a nonresident and need estate tax or gift tax planning for your US assets contact us at ddnelson@gmail.com.