After successfully obtaining a green card, what taxes do new immigrants in the United States need to pay? Many friends who have successfully immigrated to the United States are very concerned about tax issues. So, how much do you know about U.S. taxes? Especially after obtaining a green card, what tax policies and tax knowledge are relatively easy to confuse?
WorldWay's U.S. immigration experts will organize the most common tax knowledge errors in the form of Q & A.
Q1: Once a green card is obtained, will the U.S. tax the global assets of the green card holder (including those in China)?
A: This understanding is completely incorrect.
First, let’s introduce the definitions of assets and income. Assets are the wealth you have accumulated from the past to the present, while income refers to your investment returns or salary, bonuses, and commissions for that year.
The U.S. global taxation policy applies only to personal income, not personal assets.
For example, suppose you have 20 million RMB in rental real estate in China, earning 2 million RMB in rent each year. Once you obtain a U.S. green card, the IRS will not require you to pay taxes on the value of the 20 million RMB real estate asset, but will only tax the annual rental income of 2 million RMB.
Q2: After obtaining a green card, do I need to pay capital gains tax?
A: After you obtain a green card, there is a concept of capital gains tax in the U.S., but this tax only needs to be reported when you sell an asset.
U.S. tax experts have proposed some reasonable tax-saving methods for this issue. To prepare for capital gains tax reporting, clients can sell their assets before obtaining a green card or transfer them to a non-immigrant's name, so that after obtaining the green card, there will be no capital gains tax issue.
Q3: The Foreign Account Tax Compliance Act (FATCA) requires foreign countries to provide the IRS with information about U.S. residents' investment income and interest and dividend income from U.S. assets, including account balances, interest, and payment directions. What impact will this have on green card holders?
A: The Foreign Account Tax Compliance Act (FATCA) only involves the reporting of funds in bank accounts and does not involve the reporting of real estate or other fixed assets.
Information reporting and tax payment are two completely different concepts; it is just filling out an additional declaration form and does not require paying any tax. It is recommended that immigrant clients consult a U.S. professional accountant early for planning, which will not have a significant impact on well-planned immigration.
Q4: Once a green card is obtained, do all domestic incomes need to pay U.S. taxes?
A: The U.S. provides an annual tax exemption of nearly $90,000 for individuals earning income from overseas.
For example, if both spouses hold green cards and each earns $100,000 from China annually, if they file taxes separately, after deducting the $90,000 exemption, each only needs to report taxes on $10,000 of income. If this $10,000 has already been taxed in China, or if there are any business expenses in the U.S., they can still enjoy deductions. After deducting expenses, it is estimated that each person only needs to pay $1,000 to $2,000 in taxes annually.
Q5: Do green card holders need to pay U.S. taxes on profits from their Chinese companies after obtaining a green card?
A: This is a completely incorrect understanding. The U.S. global taxation applies to the individual green card holder.
If a green card holder owns shares in a Chinese company and the profits of that company are not distributed to the green card holder in the form of dividends, then the green card holder does not need to pay U.S. taxes on the profits of the Chinese company. For example, if the Chinese company owned by the green card holder earns 10 million RMB annually, but the green card holder, as a shareholder, does not transfer the company's profits to their personal account in the form of dividends, then they do not need to pay U.S. taxes on the 10 million RMB profit from the Chinese company. The "Fat Cat" agreement has no significant impact on Chinese companies.
