Are you getting close to retirement age and wondering where you might retire to extend the life of your retirement savings? The solution might be to retire abroad. But before doing so, it is crucial to consider the tax ramifications because not all locations for retirement are equal. A CPA in Bluffton, SC, can help with your accounting needs.
Worldwide Income Taxes
Citizens of the United States are still responsible for paying their federal taxes after leaving the country. Suppose all of a retiree’s assets were transferred to a foreign country. In that case, they still need to submit an annual return with the IRS, even if they might not owe any American income tax during their residence overseas. The basic line is that, regardless of where income is made, it may still be subject to taxation.
Unlike most other nations, the United States taxes people according to citizenship, not residency. Consequently, in every taxable year that goes above the threshold requirements for filing, every citizen of the United States (and resident alien) compulsorily must submit a U.S. tax return detailing all worldwide income (earnings from foreign financial institutions and securities holdings).
Reporting Foreign Bank and Financial Accounts
U.S. citizens who possess foreign bank accounts, brokerage accounts, mutual funds, unit trusts, or other financial accounts must submit an FBAR by April 15 if they:
At any time during the calendar year, there is a financial interest in, signing authority over, or additional power over, any foreign bank accounts that are worth more than ten grand. A territory or possession of the United States of America, such as Puerto Rico, Guam, the U.S.Northern Mariana Islands, American Samoa, or the Virgin Islands, is not considered to be a foreign country.
Social Security or Pension Income
Your payments might not be taxable, and you might not have to file a federal income tax return if Social Security is your only source of income. A Form SSA-1099, Social Security Benefit Statement, indicating the amount of your benefits, should be received if you receive Social Security.
Other nations often do not tax retirement income. For example, suppose you are a U.S. citizen retiring overseas and receiving Social Security. In that case, you might owe U.S. taxes on that income even if you are not subject to local taxes in the nation where you live in your golden years.
However, you might have to pay U.S. taxes on some of your benefits if you get income from other sources, such as part-time work or self-employment. Depending on your home country, you might also need to declare and pay taxes on any income you received there when you retired.
