Specific citizenship questions

M

manny6

Registered Users (C)
I apologize for asking questions that have may been repeated many times on these forums. I would like some advice on my specific case.

My situation:
1. I believe I can apply for Citizenship at/before end of this month as I meet the requirements (residency as well as 3 years since I received my conditinal PR card through marriage).
2. I have an Indian passport.
3. I travel a lot.
4. I may plan to settle in another country later in my life.

So for me the main advantage would be being able to travel on a US passport (visa free entry to a large number of countries) vs. an Indian passport (very very restrictive - I need a visa everywhere I go).
The main disadvantage would be taxes. If I ever moved anywhere that has a lower tax rate than the US I owe the US the difference. As fas as I know, the US is the only country that does this. Now, since I have a green card will my tax situation be the same? If I moved and gave up my GC (for reasons other than to save taxes) would my tax situation change? I assume giving up US Citizenship is not a viable option if I change my mind later. Can someone please shed some light on the tax situation for me in a nutshell? Also, can I hold dual citizenship with India? If not, what are my options of having the freedom to travel to India without a visa? I'd appreciate educated opinions on whether Citizenship may be right for me or not.

Secondly, I plan on travelling out of the country soon and was wondering if I should delay my trip and apply before I leave, or go now and apply after I get back. I assume I can only stay out of the country for a maximum of 6 months? How long does the whole process currently take? Do I need a lawyer (I did for my GC)? At what points in the process do I physically need to be in the country? Can I send in my N-400 before the 3 years of being on GC has passed?

Thank you.
 
Regarding tax, it is an issue if you make a six-figure salary.
You can exclude the first $87,600 from your taxable income, plus a minor housing allowance (unless you live in a city where cost of housing is extremely high, Hong Kong being the highest).
The first taxable dollar falls in the tax bracket it would have fallen without the FEIE, which is 28%. Of course, if the US has a treaty with that country (the US has treaties with many countries), you have a tax credit for the income tax you paid to the foreign country (you can't claim a credit for foreign tax paid on the excluded income though).
If you live in Western Europe your US tax bill could be reasonable or even nill, even with a high income.
If you move to a low-tax country (Russia, Hong Kong, UAE being the first that come to my mind), your US tax bill would be enormous if you make a good salary.
 
Apply as soon as your fulfill the requirments. If you are out of the country after applying, make sure someone can access and open your mail and contact you to relay appointment dates.

manny6 said:
Thanks. How about the timing for the application for Citizenship?
Click to expand...
 
How long does the whole process take approximately for someone applying to the Texas office assuming the application was filed today? At what points of time do I have to be in the country and are those points flexible?
 
sarrebal said:
Regarding tax, it is an issue if you make a six-figure salary.
You can exclude the first $87,600 from your taxable income, plus a minor housing allowance (unless you live in a city where cost of housing is extremely high, Hong Kong being the highest).
The first taxable dollar falls in the tax bracket it would have fallen without the FEIE, which is 28%. Of course, if the US has a treaty with that country (the US has treaties with many countries), you have a tax credit for the income tax you paid to the foreign country (you can't claim a credit for foreign tax paid on the excluded income though).
If you live in Western Europe your US tax bill could be reasonable or even nill, even with a high income.
If you move to a low-tax country (Russia, Hong Kong, UAE being the first that come to my mind), your US tax bill would be enormous if you make a good salary.
Click to expand...

For $87600 he has to pay the taxes in other country. Is it correct?
 
number30 said:
For $87600 he has to pay the taxes in other country. Is it correct?
Click to expand...

He has to pay taxes in the other country on the entire income!
The first $87,600 can be excluded on his US federal tax return.
However, foreign taxes paid on the excluded income cannot be part of the foreign tax credit (given that the US has a tax treaty with that country).

For example: the USC makes $200,000 abroad in a country where there's a flat tax rate of 10%. To simplify, there are no tax deductions.
The USC pays $20,000 in taxes to the foreign govt.

While filing his US tax return, he can exclude $87,600. His taxable income will be $112,400.
Those $112,400 are taxed as of the upper part of a $200,000 income. $76,950 will be taxed at 28% and the remaining $35,450 will be taxed at 33%.
Total tax before foreign tax credit is $33,244.50
You could exclude the foreign tax paid. However, not $20,000 but just $11,240 (the 10% paid on the non-excluded income of $112,400).
Total US federal tax liability would be $22,004.50

The USC could also exclude a standard housing allowance of $11,536, besides the $87,600
In some cities the housing exclusion could be much higher, depending on the cost of living (HK has the highest housing exclusion).
 
Hi Sarrebal,
to summarise, USC would have to pay $20,000 (foreugn tax) + $22,004.50 (US tax) out of $200,000 earned abroad?
What are the taxes in EU, for example in Italy? Or UK?
Thanks for the input.
HudsonValley

sarrebal said:
He has to pay taxes in the other country on the entire income!
The first $87,600 can be excluded on his US federal tax return.
However, foreign taxes paid on the excluded income cannot be part of the foreign tax credit (given that the US has a tax treaty with that country).

For example: the USC makes $200,000 abroad in a country where there's a flat tax rate of 10%. To simplify, there are no tax deductions.
The USC pays $20,000 in taxes to the foreign govt.

While filing his US tax return, he can exclude $87,600. His taxable income will be $112,400.
Those $112,400 are taxed as of the upper part of a $200,000 income. $76,950 will be taxed at 28% and the remaining $35,450 will be taxed at 33%.
Total tax before foreign tax credit is $33,244.50
You could exclude the foreign tax paid. However, not $20,000 but just $11,240 (the 10% paid on the non-excluded income of $112,400).
Total US federal tax liability would be $22,004.50

The USC could also exclude a standard housing allowance of $11,536, besides the $87,600
In some cities the housing exclusion could be much higher, depending on the cost of living (HK has the highest housing exclusion).
Click to expand...
 
HudsonValley said:
Hi Sarrebal,
to summarise, USC would have to pay $20,000 (foreugn tax) + $22,004.50 (US tax) out of $200,000 earned abroad?
What are the taxes in EU, for example in Italy? Or UK?
Thanks for the input.
HudsonValley
Click to expand...

I would have to check the UK, since I never worked there.
However, Italy's highest income tax bracket (EUR 75,001 and up) is 43%, therefore there would be no US tax liability.
 
Are these tax rules the same for Permanent Resident/Green Card holders? Also my original questions-
How long does the whole USC process take approximately for someone applying to the Lewisville, Texas office, assuming the application was filed today? At what points of time do I have to be in the country and are those points flexible?
 
manny6 said:
Are these tax rules the same for Permanent Resident/Green Card holders? Also my original questions-
How long does the whole USC process take approximately for someone applying to the Lewisville, Texas office, assuming the application was filed today? At what points of time do I have to be in the country and are those points flexible?
Click to expand...

They are the same for LPR and USC. Also, if you surrender your GC these rules apply to you for the 5 following years.
Processing time depends on the DO, Lewisville is just a lockbox facility. Your application is then sent to your local DO for interview.
It works just like the Chicago lockbox for the AOS process.
 
manny6 said:
Are these tax rules the same for Permanent Resident/Green Card holders? Also my original questions-
How long does the whole USC process take approximately for someone applying to the Lewisville, Texas office, assuming the application was filed today? At what points of time do I have to be in the country and are those points flexible?
Click to expand...

manny6 said:
I would apply in the state of New York, NY metro region. Any ideas?
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manny6, you need to be resident in the district you apply from for 90 days prior to applying, so which is it?

Nobody can tell you exactly how long it will take but all being well 4-9 months is reasonable.
 
I have been a resident in New York for more than 90 days. During the 4-9 months, roughly when do I have to be in the country? Can I postpone an interview or appointment if I am out of the country without making the application void?
 
sarrebal said:
Also, if you surrender your GC these rules apply to you for the 5 following years.
Click to expand...
Not necessarily. Permanent residents who surrender their status and no longer have US-based income would not continue to be liable for US taxation or tax reporting if they have been permanent residents for less than 8 of the last 15 years, or their income and net worth is below certain levels.

http://www.dinslaw.com/tax_law_changes_and_potential_impact_on_expatriates/

http://www.pmstax.com/intl/expat0807.shtml
 
Last edited by a moderator:
Does the same rule apply to individuals holding dual citizrenship (US and another country)?

Before this, LPR and USC in the eyes of IRS were treated the same. And the procedure to get off their hook in case of resigning US citizenship or permanent residence status was the same.

Jackolantern said:
Not necessarily. Permanent residents who surrender their status and no longer have US-based income would not continue to be liable for US taxation or tax reporting if they have been permanent residents for less than 8 of the last 15 years, or their income and net worth is below certain levels.

http://www.dinslaw.com/tax_law_changes_and_potential_impact_on_expatriates/

http://www.pmstax.com/intl/expat0807.shtml
Click to expand...
 
How about the exchange rate? 75K Euro exceeds 87K USD.
What are the taxes in Italy below 75K Euro?
43% does it include all the taxes or is it just income tax?

sarrebal said:
I would have to check the UK, since I never worked there.
However, Italy's highest income tax bracket (EUR 75,001 and up) is 43%, therefore there would be no US tax liability.
Click to expand...
 
HudsonValley said:
Does the same rule apply to individuals holding dual citizrenship (US and another country)?
Click to expand...
They don't care about your other citizenship or lack thereof, other than dual citizens giving up US citizenship before age 18½ (if you became a dual citizen as a child, some other countries force you to drop one citizenship at age 18). And if you're giving up US citizenship, they don't care how long you held US citizenship; the 8 year rule for former permanent residents doesn't apply to citizens.
 
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