After immigrating to the United States, how should new immigrants file their taxes? What are the common questions regarding tax filing for new immigrants? WorldWay immigration experts provide a detailed analysis of several key issues regarding tax filing for new immigrants as follows:
1. After the applicant is approved, do they need to report personal assets, such as cash and stocks held in China, when entering the United States?
According to the U.S. tax system, there are three types of individuals who are required to file taxes: first, citizens; second, green card holders; and third, tax residents. What is a tax resident? For example, if an investor resides in the United States for more than 31 days in the current year, or if the total number of days of residence over the past three years exceeds 183 days, they are considered a tax resident.
Because the calculation method is complex, the aforementioned days are not simply calendar days. To simplify, it is recommended that investors limit their stay in the United States to no more than 120 days per year to avoid becoming a tax resident. If an investor does not become a tax resident, they generally do not need to file taxes. If an investor has become a green card holder but has no income within the United States, they are not required to report their global income.
2. After immigrating, how should real estate in China be reported to the U.S. government? Under what circumstances must taxes be paid?
According to current U.S. regulations, real estate held by an immigration applicant outside the United States is not among the items required to be reported. After becoming a U.S. green card holder, if the property appreciates and is sold for a profit, and after paying the Chinese property appreciation tax, there may only be a U.S. tax obligation if the tax paid in China is lower than the 15% U.S. capital gains tax.
If an investor owns property and it is not rented out, it generally does not need to be reported. Furthermore, the appreciation of the property does not need to be reported. This is because U.S. tax law considers that the investor has not yet realized the income; taxes are only due when the investor sells the property. It is recommended that investors conduct an appraisal of all assets and real estate under their name before applying for immigration to facilitate proof of the source of funds when filing taxes in the future.
3. How does honest and reasonable tax filing affect the enjoyment of retirement, pension, and medical benefits?
Honest tax filing is an obligation of every taxpayer, and this is very important. Taking U.S. healthcare as an example, the U.S. has world-class medical equipment, but medical insurance is very expensive. The U.S. social security welfare system provides retirement pensions and Medicare cards to elderly residents, which facilitates access to medical care. If a resident has no income, the card covers all medical expenses. If they have income, the resident only pays a portion. If an investor does not file taxes honestly, they cannot apply for these benefits. To apply for this card, one must accumulate 40 credits. An individual can earn a maximum of 4 credits per year; reporting $1,300 in income earns 1 credit, so reporting $7,000 annually allows one to earn the 4 credits for the year. By filing for 10 consecutive years, one becomes eligible to apply for the card.
4. Overseas assets of U.S. citizens and green card holders must be reported. For immigration clients, does everything need to be reported?
Currently, the U.S. Department of the Treasury has many reporting requirements intended to warn overseas U.S. taxpayers not to break the law by failing to report required income, as the Internal Revenue Service (IRS) requires taxes to be paid on global income. Families considering immigration should plan now, as the difference in post-tax income with or without planning can be vast. If an investor does not report truthfully, the penalties are severe. In the United States, tax evasion is a criminal offense that can lead to both fines and imprisonment.
5. What are the considerations for high-income individuals when reporting income? Do you have any good advice?
Typically, the U.S. tax filing season runs from January to April 15. According to the provisions of the U.S.-China tax treaty, middle-to-high income individuals do not need to pay double taxes. However, regarding how to file and how to utilize various U.S. policies to legally save, defer, or exempt taxes, it is recommended to use a U.S. Certified Public Accountant (CPA) and tax attorney familiar with the actual tax systems of both countries for comprehensive planning.
For middle-to-high income individuals, it is recommended to divide income into two parts for tax filing. If filing for salary income, tax-saving methods are relatively limited, as are the amounts. Investors can utilize mortgage interest deductions for their primary residence or make charitable donations, both of which are tax-deductible. If it is business income, many business expenses can be used to avoid taxes.
