For many, receipt of a Green Card is a joyous occasion, offering the promise of a new life in the U.S, a high standard of living and the potential to achieve the coveted “American Dream”. But what are the tax implications of becoming a U.S lawful permanent resident? In this article, we will consider the tax status of U.S lawful permanent residents and what may happen if a U.S lawful permanent resident chooses to relinquish their Green Card.

Please note, this article is provided for information purposes only. We would advise anyone contemplating relinquishing their Green Card to seek advice from a Certified Public Accountant (hereafter “CPA”) prior to taking any action, in order to obtain advice on their own unique circumstances.

U.S Taxation

U.S citizens and lawful permanent residents are required to report their worldwide income on their U.S tax returns. For high net worth U.S lawful permanent residents, this may lead to the exposure of assets to taxation in multiple countries, significantly diminishing their overall net wealth. Some U.S citizens have even renounced their U.S citizenship for the purpose of avoiding taxation by the United States, which may lead to a finding that they are inadmissible to the United States.

The U.S “Exit Tax”

If a U.S lawful permanent resident wishes to relinquish their Green Card, they may be required to pay an “Exit Tax”.

Broadly speaking, there are three triggers to the application of the Exit Tax:

  1. An aggregate net value of worldwide assets totaling over $2 million;
  2. Average net annual income tax liability of over $162,000 OR
  3. The taxpayer cannot certify 5 years of tax compliance.

If any of the above apply, the taxpayer in question may be liable to pay an Exit Tax, upon giving up their Green Card. The Exit Tax is calculated as though the taxpayer sold all of their assets before they expatriated and had to report the gain to the IRS. At present, net capital gains can be taxed at a rate in excess of 20%.

If you are a U.S lawful permanent resident considering abandoning or relinquishing their Green Card, we would recommend that you speak with a CPA to seek advice on the tax consequences of such a move.

Davies Legal Immigration

At Davies Legal Immigration, we provide advice and representation in connection with all immigrant and non-immigrant visa categories, including cases in which a waiver of inadmissibility is sought and cases in which there have been previous visa denials. We pride ourselves on providing the highest standards of client care and undertake to keep you informed. Call now for a complimentary telephone call with a licensed US immigration attorney and free, no obligation price quotation.

 

Published: 2nd May 2018