Updated: Mar 30
If you decide to move back to the US after living abroad, you may have bank accounts, investments, and pensions registered abroad as well as in the US. You may also own real estate abroad. Before moving back to the US, you’ll need to think about whether it’s in your best interest to close your foreign accounts and move your assets to the US, taking into account tax implications and currency conversion costs.
In this article, you’ll learn about:
• Should you liquidate your foreign investments and pensions?
• Tax considerations for returning Americans
• Currency considerations for returning Americans
• Moving back to the US checklist
Should you liquidate your foreign investments and pensions?
Many returning Americans wonder whether they should liquidate their foreign investments and pensions when they move back to the States. While having financial accounts and assets overseas means still FBAR and FATCA forms, it can sometimes still be in your best interest to leave them abroad after you move back.
For example, you may wish to continue periodically spending time in the country where you’ve been living, or return to live there in the future, in which case retaining property, bank and investment accounts could make sense. Or, it may be that you want to avoid paying capital gains tax in the foreign country by liquidating all your foreign investments at once, and so decide to sell them slowly over a number of years to make use of an annual exemption. Or, you may feel that because the dollar is strong at the moment, it’s not a good time to sell foreign assets and buy US assets, and so instead choose to wait a few years until the dollar weakens.
An important factor when deciding whether to transfer foreign pensions to the US is whether there’s a US tax treaty with the country where you’ve been living that allows you to transfer foreign pensions into US pension plans without losing the tax advantages.
Some expats returning to live in the US on the other hand are motivated by the idea of keeping everything tidy and consolidating their pensions and investments in one place.
There is no ‘one size fits all’ answer to this question, and what is best for you will depend on your circumstances.
Tax considerations for returning Americans
As you’re no doubt aware, the US requires all US citizens to file US taxes, even while living abroad.
There are also other US reporting requirements for US citizens living abroad relating to owning foreign-registered financial accounts and assets.
While most Americans living abroad don’t pay any US taxes because they claim either the US Foreign Tax Credit or the Foreign Earned Income Exclusion when they file, it’s important to ensure you’re up to date with your US filing and reporting before you move back to the States to avoid unexpected penalties and fines for missed filing.
Another significant tax question when moving back to the US is whether you’ll be liable to pay any additional tax if you liquidate assets and transfer them back to the US.
The answer to this depends on the tax rules in the country where you’ve been living and the value of the assets you sell.
From a US perspective, capital gains on assets sold that were owned for less than a year is considered income and taxed along with your other income at standard rates.
Gains on the sales of assets that were owned more that a year are taxed at 15%, or 20% over a certain value.
Note that if you sell your primary home, there’s a $250,000 US capital gains tax exemption if you’re a single filer (or married filing separately), or $500,000 if you file jointly.
Note also that if you are selling assets that realized a capital gain to transfer the proceeds back to the US, if you also liquidate loss-making assets in the same year, you can offset the losses to reduce your capital gains tax bill.
If you have to pay foreign capital gains taxes on assets you sell, you can claim US tax credits based on the amount of foreign tax you’ve paid to avoid double taxation on the same gains.
Once you’ve sold your foreign assets, there’s no US tax triggered by transferring money internationally.
Currency considerations for returning Americans
The two major currency considerations relating to transferring investments to the US when you move back are firstly whether it’s a good time in terms of the currency conversion rate, and secondly how to minimize costs when you make the transfer (whether now or in the future).
Your financial advisor may have a view on whether it’s a good time in terms of the current exchange rate, however no one knows for sure how currencies will move in the near future. A good currency exchange company will also be able to help you either lock in a current rate, or book a transfer when the exchange rate hits a preferable target rate in the future.
In terms of minimizing transfer costs, you can save a significant amount of money by using a specialist international currency broker instead of making bank to bank transfers.
Moving back to the US checklist
1 - Consult your expat financial advisor and expat tax advisor, ideally in tandem, to make a plan regarding your foreign registered assets and whether to transfer them back to the US. They will also help you execute your plan.
2 - Ensure that your tax affairs are in order both in the US and the country where you’ve been living,.
3 - Start preparing for the move - where will you live and do you need to find a new job? Do you already have US bank and brokerage accounts, or do you need to open new ones? Will you need to purchase a car? Do you need to find new schools for your kids? You can organize most of these from abroad.
4 - Let the relevant authorities and companies abroad know that you’ll be moving, such as the tax authorities, financial institutions, and utility companies.
5 - Get quotes for moving your possessions, or organize selling those you won’t be taking back, such as cars, for example.
6 - You may need to organize new health insurance in the US, and you may need to arrange for your foreign provider to transfer or provide you with your health records.
7 - Book your flights!
If you have any questions, don't hesitate to contact us.
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