The United States tax system is highly sophisticated and effective. Among various federal taxes, personal income tax is the primary component, accounting for approximately 50% of total federal tax revenue. Additionally, individuals are subject to federal estate and inheritance taxes, as well as property taxes at the local level. According to statistics, from 2000 to 2010, the average U.S. household paid approximately 29% of its annual income in various taxes to the government. In the process of U.S. investment immigration, one should always remain mindful of how to plan taxes "intelligently" and implement reasonable tax avoidance strategies.
U.S. taxes are levied on a household basis, and the annual gross income of a household is not the final tax base. After gross income, deductions such as exceptions, deductions, extensions, personal pension plans, home purchases, and loans can be applied, and taxes are calculated based on the final net income.
Before immigrating, one should consider the differences in asset disposition and plan how funds will flow into the United States. For example, one could sell real estate or stocks prior to immigration, obtain the cash, and repurchase the assets or gift them to family members after immigration to avoid related tax issues. U.S. tax law contains many provisions for tax deductions and exemptions, and since Chinese immigrants often have broad financial involvement, there are many ways to reduce tax liability. Asset transfers, gifting, home sales, and long-term investments can all provide tax savings, and even travel expenses for business via flight or driving may be eligible for appropriate deductions. Take the example of an applicant with an annual overseas income exceeding 1 million RMB: after accounting for foreign earned income exclusions, housing expense deductions, and personal exemptions, the tax payable in the U.S. may be just over 3,000 USD. Furthermore, taxes already paid in China may be used as a credit.
When applying for investment immigration, one may choose the spouse with lower income and fewer assets as the primary applicant. If a couple applies for immigration and the spouse with lower income and fewer assets acts as the primary applicant, and only one person applies for a Green Card, the other spouse's assets held outside the U.S. will not be subject to overseas income taxation.
After approval, the applicant must enter the United States to report within 180 days. It is from the date of landing in the United States that a new immigrant begins to fulfill their obligation to report assets to the U.S. government. Before becoming a permanent resident, there is no need to pay taxes to the U.S. government on overseas non-appreciated assets; only realized capital gains earned after landing must be reported and taxed according to the law. Therefore, it is essential to keep proof of the sources of all income and assets. To avoid incorrect taxation or penalties, one should make every effort to ensure the accuracy of the documentation verifying the sources of assets.
There are exemptions for overseas income, and U.S.-China taxes can be mutually offset. For permanent residents working and residing outside the United States for more than 330 days a year, the individual tax deduction amount for 2011 was 91,400 USD. A couple could exempt 182,800 USD from federal income tax. For instance, the corporate income tax in China is 20% to 25%, and the personal income tax on dividends is 20%, totaling nearly 40%, whereas personal income tax rates in different U.S. states are approximately 15% to 20%. While investment gains such as those from property purchases are taxed at 20% in China, the investment yield tax rate in the U.S. is only 15%; therefore, taxes paid in China can be used to offset the portion payable in the United States.
