Home ยป Are You Planning to Live Abroad? Brian Colombana Gives Some Critical Insights

Are You Planning to Live Abroad? Brian Colombana Gives Some Critical Insights

Some research suggests that the number of US citizens who decide to live outside the country may have gone up into the millions by choice or by chance. Brian Colombana says the reasons are many but include new opportunities for financial developments, a change in their time zone, either personal health issues or working/living conditions, etc. Some may move to pursue advanced education abroad, live with family members they would like to spend more time with, etc.

Interestingly, some US citizens abroad might still come back to the nation forever, not because they wish to live and work in the area but because their heart is still with this place because some of their ancestors were born on American ground before immigrating. More precisely, a child of US citizen parents, whether the parents’ home country is in or out of the country at the time, and are theoretically only US citizens themselves, the child automatically becomes a US citizen regardless of the land of their birth. They cannot opt-out of this even as an adult, and if they decide to renounce their citizenship later in life, they will no longer be American, informs Brian Colombana.

No matter why you choose to live abroad, here are some things you must consider.

US Income Tax Rules

In general, US citizens living abroad must declare non-US income to the IRS, regardless of whether they owe taxes on that income in their country of residence. They must paper certain forms and be subject to specific reporting requirements under the Foreign Bank Account Report (FBAR) rule and other rules designed to prevent tax evasion.

Even if you have zero tax liability and no tax return requirement, be careful of the consequences for not filing for each year. Failure to provide information can prove expensive and lead to failure-to-file penalties. Brian Colombana says you may have to pay USD 10,000 per failure-to-file year and a maximum criminal fine of USD 250,000. The non-filing offense can also land you in jail.

US Estate Tax Regulations

Even if you don’t consider your legacy, the IRS will. No matter where you live, all US citizens have to pay taxes on their estate when they die as per the estate tax. More precisely, if you own any assets abroad, you may have to pay about 40% in tax. In 2021, the exemption amount was more than USD 11 million. However, new changes in the US tax plan suggest that this exemption might drop to below USD 5 million, and tax rates might increase.

If you are a US citizen who lives abroad and doesn’t want to file yearly returns with the IRS and deal with double taxation – The Exit Tax and other taxes such as the estate or death tax in case of death – there is an alternative. You can leave your US citizenship to free yourself from the double cost burden. Many would warn you against this step due to the complexity of the process. So, it is better to be thorough with your decision before you do anything.