Some questions about US taxes

7 posts in this topic

Hi there,

I am planning moving to US in the next 2-3 months. I'll be employed and resident there. I would like to understand more about US individual taxation system.

 

My question is if I have capital gains from stocks, selling the property in current CY in DE then how these gains are going to be handled in US taxation system. I'll file interim tax return here in DE before leaving. Do I need to declare these gains again in US? I am asking particularly because I might be in advantage position here from tax point of view (offset of losses, deducting maintenance costs etc.). But if I have to declare whole DE income again in US then it would be mess to calculate again. 

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go to irs.gov,  dowload all the instructions and forms, starting with the form 1040, and do the math.  If you are resident in both countries during the year, yes you will have a "mess" on your hands.

 

or hire an accountant who can explain it to you.

 

no one can guess what your personal liabilities will be as they depend on your personal, specific situation.  

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Thanks @lisa13 for your reply.

However, my question was not about there would be mess or not. I am asking whether I need to declare significant DE income esp. capital gains in US taxes. I am in bit advantage position here. I'll have company sponsored accountants for first 2 years to handle the mess if I accept the offer. I am trying to know whether I would be at loss even if I had paid ~25% capital gains tax here already.

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22 hours ago, lisa13 said:

no one can guess what your personal liabilities will be as they depend on your personal, specific situation. 

 

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@DreamLight

 

You are to be congratulated for having the foresight to make this sort of tax inquiry BEFORE moving to the US.

 

By doing so you can potentially save yourself and your family members a good chunk of money and some serious headaches.

 

Before I mention some specifics you need to know how your situation is labeled in US tax parlance.  In the calendar year in which you abandon your German tax residence and acquire US residence you will be regarded as a "Dual Status Alien".

 

For general information about what this means and the options available to you please read (carefully) the following:

 

https://www.irs.gov/individuals/international-taxpayers/taxation-of-dual-status-aliens

 

What the IRS information sheet does not discuss but which may be of critical importance to you is that once you become a US tax resident you are going to be treated just as bad as US citizens are with respect to any foreign financial connections that you may retain with the "Old World".

 

The administrative and potentially punitive horrors of owning foreign funds (incl. ETF's etc.) can be easily avoided by the simple expedient of selling ALL of said funds (and cancelling any Sparpläne you might have) before you acquire US residence and never - repeat: NEVER - buy any more FOREIGN funds afterwards.  Under current German tax law this should not be particularly burdensome because all funds are "marked to market" and for fund shares acquired before 1.1.2009 you have a €100,000 lifetime Freibetrag for realized gains.

 

Consider selling any other securities (e.g. stocks, bonds, etc.) acquired before 1.1.2009 that you are considering selling for whatever reason during the period of time you are resident in the US.  If you plan to live in the US permanently, that German tax free status will be lost for ever. If you sell them at a gain while you are a US resident you will get hit with a capital gain tax. (Not as bad as the Abgeltungssteuer but there will be no Sparerfreibetrag.)  On the other hand if the investments are solid and you think you are likely to be returning to Germany some day, then hold on to them - if your German Depotbank will allow it.

 

The opposite consideration should apply to any investment positions acquired before 1.1.2009 you might still have that are underwater. Their realized losses brings you nothing under German tax law but could be of use to offset US capital gains if you wait to sell them at a loss after you acquire US residency.

 

You may find that once your new US residence becomes known to your German bank that your bank may force you to close the account. (eg. Deutsche Bank, Commerzbank, et al.)  Plan for that possibility by asking ahead of time and if you need to keep German cash or securities accounts open find a bank to switch them to that won't care if you live in the US.

 

Although Germany will apply its Progressionsvorbehalt in calculating your tax rate on income earned in Germany before your "expatriation" to the US, the US does not use this for computing its taxes in transition years.

 

There's likely more depending on your particular circumstances but now that you have some basic information about the rules, you will be better able to pump your German and US tax advisors for specifics.

 

Bon Voyage!

 

 

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Kudos to @Straightpoop once again... great answer and information from the true US-tax expert on Toytown !

 

Cheerio

 

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.
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