Question on citizenship and taxes

[galiflash]

I'm facing a dilemma I could use some third-party perspective with. I recently applied for naturalization, and have learned since applying that the U.S. taxes its citizens based on citizenship, rather that residence.
That means that, were I to return to my country of origin, I would be required to file a U.S tax return yearly, in addition to my country's tax return.

Is this reason enough to reconsider whether I should go ahead with the naturalization process? I realize there are treaties in place that eliminate or reduce double taxation (except for the very wealthy, which is not my case). Still, the idea of having to carry this tax obligation for life even if I am no longer a US resident strikes me as an oddity.

Any and all input will be appreciated.

[USBrit]

Go for it - it leaves your options open for returning should the EU not work out. BUT remember the tax liability you will need to file a US return every year anyway - but if there is a dual tax treaty between Spain and the US you should be OK but also look into the Foreign Income exclusion. Good luck

[galiflash]

Go for it - it leaves your options open for returning should the EU not work out. BUT remember the tax liability you will need to file a US return every year anyway

Well, I realize mine is somewhat of a privileged dilemma to be in...which only makes it that much more difficult to unravel :confused1:

I know it's a long shot, but it would help to hear from other people in my position (i.e., naturalized citizens who have become expatriates), or anyone well-versed in dual taxation. I am wondering just how much of a burden in terms of time and cost staying on top of my U.S. taxes would be. I certainly would need to enroll the help of a specialized accountant.

Thank you very much for your reply.

[kitkat1]

Galiflash, it's an interesting dilemma. You sound very clear on the pros and cons but I do think you should consult a few accountants. If you don't make money in the US, you won't have to pay taxes on it. So while it's a pain to be required to file a tax return, it should not end up being a big deal. I would delve into this part a little more with someone who knows their stuff.

There are some important advantages to being a citizen that you should consider. As US Brit mentioned, it really does leave your options open and that's a big one. If you ever plan to travel back to the US, it would make things a whole lot easier. If you ever find yourself in a situation where there is a natural disaster or a political problem where Americans are evacuated by the US government, you're covered (I know it's unlikely but it could happen!)

I would think long and hard on this one - it seems like a pretty big opportunity to walk away from.

Good luck.

[galiflash]

I would delve into this part a little more with someone who knows their stuff.

I'm actually already in consultation with a Spain-based accountant who specializes in tax returns for U.S. expats. So far she has been confirming double taxation would mostly be a non-issue in my case.

There are some important advantages to being a citizen that you should consider. As US Brit mentioned, it really does leave your options open and that's a big one.

I fully agree, and this was my primary motivation when I applied for naturalization, before I fell prey to the myriad potential pros and cons :ill:

I would think long and hard on this one - it seems like a pretty big opportunity to walk away from.

That's the one thing that is beyond question, indeed.

Good luck.

Many thanks for your input.

[Marie]

I agree. If you leave and later down the road you change your mind, you won't be able to just come back. If all you have to do is file a tax return but not get taxed double, I don't see the problem. I think it would be well worth it.

[Klame1983]

Go through with the naturalization process. If you don't make money in the U.S., you're not required to file taxes. It's as simple as that. Like others have said already, you never know if you'll need to return the U.S. It's better to keep your options open. Good luck with whatever you decide. Also, if you decide to naturalize, don't tell them at the interview that you intend to leave the country indefinately.

[galiflash]

If you don't make money in the U.S., you're not required to file taxes. It's as simple as that.

Actually, that's not my understanding. As a US citizen, you are required to file taxes on your worldwide income, regardless of actual country of residence. Tax treaties exist between certain countries that reduce or eliminate dual taxation, provided your income does not exceed a specified threshold. So you may not have to pay US tax on top of your foreign taxes, but you still have to file a US tax return yearly.

Good luck with whatever you decide.

Thank you very much.

[galiflash]

I agree. If you leave and later down the road you change your mind, you won't be able to just come back.

Actually, I'm starting to feel my second thoughts are just a case of cold feet in the face of a major life decision. Truth is life is unpredictable enough, and there is no telling whether my plans for a return will still make sense a year from now, once I've had a chance to deal with the practicalities of it. The only certain factor in this scenario is that I've spent half of my life in the U.S., and burning my bridges would be pretty reckless.

Thank you all for helping me sort out this dilemma, putting my thoughts down on paper has been extremely illuminating.

My best to all.