How Much Income Tax Can I Expect to Pay When Immigrating to the US?

August 4, 2021

“How much income tax will I have to pay if I immigrate to the US?”

It is a very common question, one that we at AbitOs get all of the time, and not just from our clients! In fact, I was recently speaking to a very good friend and colleague in Latin America who is planning on relocating to the States in the near future, and knowing my particular area of expertise, she asked me that very question!

As the conversation progressed, my friend raised many questions that are familiar worries of many of our clients. She was concerned because she knew there was no tax treaty between the US and her home country, and she feared this would open her up to double taxation. She also felt that if she had to pay taxes on all of the income she had generated in her home country prior to immigrating, it would put her in a higher tax bracket in the US. As we continued to chat, she raised further concerns, some I was familiar with, others that were unique to her individual financial situation.

Just like my friend, any foreign person – and in particular high wealth earners –  who are planning to immigrate to the US understands the need for pre-immigration tax planning. Such planning provides recommendations on specific strategies to lower the tax burden when moving to the US. This also is true when US citizens emigrate to other countries.

However, most of the information available about pre-immigration tax planning from the IRS and other sources fails to answer the persistent question of how those strategies will be translated into dollar amounts.

At AbitOs, we recognized that clients want to see a number at the end of all the strategies; they want an answer to the most basic question — “how much will I pay in taxes?” Or in more technical terms – “how much is the client’s ultimate tax liability?”.

To answer this question, we have developed a signature service called “Tax Impact Study.” The Study provides the client with the piece they were missing to make an informed immigration decision. Believe it or not, we have encountered cases where clients were extremely concerned, only to find out after the Study that their tax liability was zero!

A Tax Impact Study can also offer clients different tax scenarios for making other types of decisions. With working remotely becoming increasingly popular, we have used the Study to assist an increasing number of executives who needed to understand the different tax liabilities of being a US employee working abroad or being hired as a consultant working from the United States.

What Can an AbitOs Tax Impact Study Do for You?  

Our world has become increasingly mobile, and international tax questions now, more than ever, are an important aspect of any personal or business decision.

Questions such as, “How much taxes will I pay if I work for a US company, but I am working from in Italy? What taxes are involved in hiring an employee overseas? How much taxes will I pay if I work in the US offering maintenance of computers in Brazil? – are just a sample of the many concerns that can be answered by our unique Tax Impact Study.

Your customized Study will also look further into all other sources of income such as rents received in other countries, dividends, investment income, etc. Additionally, we will inquire on the foreign income tax the client is currently paying in any foreign jurisdiction and whether those taxes can be utilized as a credit for income tax purposes in the US, and whether the client could benefit from any available Tax Treaty between the two countries.

All those aspects require an enormous amount of knowledge and attention to detail so that no tax law provision is broken at any point in time. As always, our goal is to transform the complex tax puzzle into easy-to-understand solutions so our clients can make decisions and control their financial future. Talk to us today about your international tax question. A Tax Impact Study is just a click away!

AbitOs specializes in the unique accounting needs of high net-worth individuals with international lifestyles as well as for entities doing business in LATAM and across the globe. Understanding all of the tax implications of immigrating to or emigrating from the US could be quite complex.  If you would like to benefit from our expertise in these areas or if you have further questions on this Alert, do not hesitate to contact us.

Luis Barahona