"An investment in knowledge pays the best interest." - Benjamin Franklin As an American investing while living abroad, one of your first considerations should be how to structure your investment portfolio. Of course, how to do this depends on a variety of personal factors - your aspirations, time horizon, risk appetite or aversion, personal investment preferences, and your situation in life as well as future plans. So rather than tell you how to structure your portfolio, we’re going to look at the different factors that you should take into consideration when structuring your investments as an American living overseas. In this article, you’ll learn about: • Investment goals and time horizon • Risk tolerance • Types of investments • Diversification • Whether to invest in the US or abroad Investment goals and time horizon The first question you should consider when deciding how to structure your investments as an expat is: what are your investment goals? Investment goals typically vary depending on your age, also known as time horizon, meaning how long it is until you’ll want to draw from your investments. This is because assets that drive growth are often different to those that provide income. So if you don’t need to draw on your investments for a while, you are more likely to focus on growth-generating equities, whereas for a shorter time horizon, bonds may be preferable. Time Horizon Examples - A young person in their twenties with some excess income decides to prioritize saving to buy a home, and also starting to save for retirement. The first priority could benefit from buying bonds, providing fixed income to grow the portfolio with little risk of loss, while for the long term, equities that will grow over decades despite some ups and downs could be appropriate. Someone in their fifties on the other hand, whose retirement income has been growing for a while, but who wants to generate some income in the short term for their kids’ college fees, may transfer some of their long-term investments into bonds. You should always seek to discuss your goals with your financial advisor based on your personal priorities and plans. Another factor relating to your time horizon is geographical: where will you expect to be when you start drawing your investments? This could impact your investment structuring too, as you may want to employ a natural currency hedging strategy. Risk tolerance Another factor that affects how you structure your investments is your risk tolerance. Higher risk assets can generate higher portfolio growth, however they may also be more volatile, and so they can result in losses that, in some cases, can take years to recover. If you’re in it for the long haul then it may not matter, because over decades you’re still likely to experience higher growth, based on long-term trends. But if you may need to draw on your assets in the short term, then it makes sense to be more cautious in terms of the assets that you invest in. Your risk tolerance may be influenced by your investment goals, too. Personality is another factor that determines your risk tolerance, as some people are naturally more aggressive or conservative in terms of their desire to take on riskier investments for a potentially higher reward. Types of investments When deciding on the structure of your portfolio, there are numerous different types of investment options available. Some of these investment classes and their typical characteristics are summarized below. The first step is deciding your asset mix, based on your investment goals, time horizon, and risk tolerance. Then, you’ll have to decide which assets within each class to invest in. This is where financial advisors can be incredibly helpful, as they have a detailed knowledge of current investment opportunities. Stocks Also known as equities, stocks are issued by companies to raise cash in exchange for a share in the company that will hopefully grow as the company grows. Some companies also distribute their profits to shareholders in the form of annual dividends. Larger, longer-established companies are generally considered safer long-term investments. Small companies and startups are considered riskier, as they might take off and achieve sky-high growth, but conversely they might fail. Bonds Bonds are issued by governments, states, and some companies as a sort of loan in exchange for a fixed annual payment or for a predefined payment when the bond expires after a fixed term. Bonds can be traded for a profit (or a loss) before they mature (expire), depending on how well the issuer is performing. As bonds feature a fixed income component and are debt instruments as opposed to equity, bonds are typically considered safer investments than stocks. Mutual funds Mutual funds are professionally-managed funds that pool many investors’ money to purchase different stocks and other assets. However, Americans living abroad should only normally invest in US-registered mutual funds, as the US has stringent tax and reporting requirements relating to foreign mutual funds, which the IRS classifies as Passive Foreign Investment Companies (PFICS). Exchange-traded funds (ETFs) ETFs are similar to mutual funds, but they often track a market or index. Again, US expats should treat foreign-registered ETFs with extreme caution, as the IRS also classifies them as PFICs. Real estate investments, and real estate investment trusts (REITs) There are many ways to invest in real estate, from owning rental property to investing in commercial or other real estate funds or real estate investment trusts (REITs). Rental property can be a good investment option if you are looking for income, however rental properties come with the burden of management and maintenance. Intellectual property, such as copyrights, patents, trademarks and royalties This is a specialist investment area, though it can result in high growth, if you invest in a patent or copyright of something before it conquers the mass market. There has been a trend in recent years for investors to buy musicians’ back catalogs too, while buying the rights to make a movie from a book has held a large amount of appeal for decades. Cash equivalents, such as certificates of deposit (CDs) or savings accounts The safest investment is to keep your money in cash, such as in a bank, however while relatively risk-free, your money is actually losing value while it’s not working for you, due to inflation, and especially when inflation rates are high. Nonetheless, many investment advisors keep some funds in cash ready to invest if a new opportunity arises. Crypto At the other end of the risk scale, investing in crypto is popular but very high risk, as crypto values fluctuate wildly. Gold, other precious metals, art, and other physical assets Gold and precious metals are considered safe investments at times when stock markets are experiencing sustained losses. Art and other assets, such as vintage clothes, cars or jewelry for example, can increase in value, however it’s wise to seek specialist advice when investing in these types of assets. Diversification Diversification is a way of managing risk by spreading your investments around different asset classes to reduce your exposure to turbulence or loss in any single asset class. A typical diversified investment portfolio includes a mix of stocks, bonds, and some cash held in case you suddenly need to access some funds or if you find a great new investment opportunity. The mix between stocks and bonds is traditionally seen as the higher the risk tolerance, the higher the proportion of stocks compared to bonds, and vice versa. Whether to invest in the US or abroad When deciding whether to invest in the US or abroad it’s important to understand the long-term tax and reporting implications in both countries, as well as taking into account your personal circumstances and future plans. So, for example, if you are saving for retirement and you’re going to retire abroad, and the country where you live doesn’t have a tax treaty with the US that recognizes that distributions made from Roth retirement plans shouldn’t be taxed, it may make more sense to invest in a local rather than US retirement plan. Furthermore, if you are going to draw income from investments held in another country in the future, you will pay for currency exchanges at that time, whereas if you invest in the US now while living abroad you will pay currency exchange costs now. Another consideration is fees. As a US expat, if you invest in the US, your investment fees will normally be lower. You can still invest in foreign assets through a US broker, but you will pay less to do so. So there are many factors to take into account what types of investments your portfolio will contain: your personal circumstances such as where you live now and where you intend to live and receive income from your investments in the future, investment fees, taxes, tax treaties, and tax reporting, and currency conversion costs. Your expat financial advisor will guide you through your options based on all these considerations. Summary We hope we’ve provided an overview of the main considerations when structuring your portfolio as an American living abroad. Armed with this knowledge, schedule a call with your expat financial advisor to discuss how you might build and maintain your portfolio and achieve your goals now that you’re living abroad. If you have any questions, don't hesitate to contact us. DUNHILL FINANCIAL, LLC IS A REGISTERED INVESTMENT ADVISER. INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN. Copyright © 2022 Dunhill Financial. All rights reserved.

Compound interest is the eighth wonder of the world.” - Albert Einstein Whether you’re an expat or not, the same fundamental advice applies when it comes to saving for retirement: start as soon as possible. This is because whatever your age, the sooner you start, the more time you are allowing for the power of compound interest to grow your retirement savings. Compound interest is one of the most important ideas to understand while saving or investing, especially when it comes to planning for retirement as an expat. It lets your money work for you, and ensures that you don’t miss out on the extra wealth you can amass over time. What are simple and compound interest? Simple interest is the quickest and most straightforward method of calculating interest on loans, savings accounts, and fixed deposit balances. It is calculated by multiplying the interest rate (in percent) by the principal (amount) and the number of days between payments. So simple interest paid over a certain period is a fixed percentage of the original amount that was borrowed in the case of a loan, or invested in the case of savings. ​ Say for example that you deposit $50,000 at a rate of 4% annually. You would have a balance of S$52,000 at the end of the first year, including the $2000 interest on your original $50,000 deposit. Additionally, you would have $52,000 + $2000 = $54,000 in the following year, $56,000 in the next year, and so forth, as the interest paid is always 4% of the original amount deposited if you’re being paid simple interest. Compound interest on the other hand is the interest earned on the principal amount plus the interest already earned. The advantage of compound interest is that, over time, the interest-on-interest effect can produce much greater returns. The more time you have to save for retirement, the more this effect will be magnified. Even if you can’t make regular contributions for a while, it will still keep compounding and you will still benefit from exponential growth. Thus, compounding interest can be a powerful ally when building your retirement savings as you let your money accumulate over time. The more you increase your savings deposits, the more you will see your savings grow more quickly, further taking advantage of compound interest. Using the same example as above, if your initial deposit is $50,000 at a rate of 4% annually, with simple interest after 20 years you would have $90,000, whereas with compound interest you would have $111,129.10, so 23.5% more. The effect is further amplified if you keep making regular deposits throughout. This graph (courtesy of Moneygeek) shows the amount of compound interest compared to the original investment: Benefits of starting saving as early as possible A 2022 report showed that approximately 70% of seniors would advise their younger selves to begin saving sooner. In the world of compound interest, time is money, because compound interest rewards those who begin early. At the start of your career, paying off school loans, saving for a down payment on a home, and other expenses may feel like a financial battle for your resources. For a stress-free retirement though, finding money to start saving too can give you a significant economic advantage. For instance, if you put $1,000 into an account that increases by 5% annually, you will have $1050 at the end of the year. If you invested $1050 in the first year and received a return of 5%, your investment would be worth $1102.50 after two years. If you start early, the returns will be very high by the time you retire. Conversely, if you start later, the returns will be relatively modest. This also implies that you can initially save less, as time amplifies the value of even relatively small amounts. You can also have a more growth oriented rather than risk averse investment portfolio if you start saving early. Even if you have ups and downs, over the long term, high risk investments with a high potential return should give you a more significant financial safety net when you retire, owing to the power of compounding. Compound interest comparative examples The following two illustrations of compound interest show how it works positively for retirement savings. Let's imagine that over 20 years, Karl, 25, and Anna, 45, both set aside money for retirement over a 20 year period. They each set aside $10,000 per year for the first ten years, then $20,000 per year for the following ten. We'll suppose that they made their contributions at year's end and that they both achieve a long-term average 6% yearly return, and they both want to retire at age 65. However, to illustrate the benefit of starting early, we’ll assume that Karl begins saving at age 25 and quits saving at age 44, while Anna begins saving at age 45 and ends saving at age 64. In this scenario, even though they saved the same amounts over the same time period, Karl will have significantly more in his retirement account at age 65 than Anna - Karl ends up with $1,603,000 in total, while Anna has just $499,700. The power of compounding allows Karl's money to increase over 40 years, as opposed to Anna's over just 20 years. Anna would need to put aside more than three times Karl's annual savings amount to have the same size total amount at age 65 due to her later start to saving. Hence, you should give yourself as much time as possible when saving for retirement, as you will have more time to benefit from the power of compounding if you start saving and investing earlier for retirement and other goals. It's too good to pass up, so start as soon as possible, whatever your age. Winding up Earning compound interest can significantly improve your quality of life in retirement, effectively enabling your money to earn money for you. Long-term investments in retirement accounts like 401(k)s benefit from both compound interest and tax benefits. Savings accounts, and stock and bond investments also benefit from compound interest over time. If you’re not sure where to save or invest for retirement, schedule a call with your expat financial advisor. If you have any questions, don't hesitate to contact us. DUNHILL FINANCIAL, LLC IS A REGISTERED INVESTMENT ADVISER. INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN. Copyright © 2023 Dunhill Financial. All rights reserved.

“Financial planning and discipline is key to one’s financial freedom” - Kishorkumar Bapalli As an expat, your financial life can be complicated. Where you invest (in the US or the country where you’re living) and the both countries’ regulatory and tax implications depending on what you invest in can quickly cloud the waters. This is where an expat specialist financial advisor becomes invaluable. They will be able to guide you through the different scenarios and implications of what you may be thinking of investing in, and furthermore, thanks to their experience, they can advise you on how best to achieve your long term goals given your current and future situation, your investment time horizon, and your risk tolerance. In this article, you’ll learn about: • The importance of seeking specialist financial advice as a US expat • Finding an expat financial advisor • What to ask your prospective expat financial advisor The importance of seeking specialist financial advice as a US expat According to one report, around 8.7 million Americans live in more than 160 countries. As an expat, which country you live in and its regulatory and tax regimes can significantly impact your investment choices, so it’s important to find an advisor who has specialist knowledge and experience working with American expats in the country where you live. Most financial advisors in the US won’t be familiar with financial planning techniques and tax implications relevant for Americans abroad, and using such an advisor can have costly implications. As an example, many US investment products aren’t available to Americans living in the EU due to EU rules. Conversely, many foreign financial products can trigger expensive and burdensome US tax and reporting requirements. Consulting an expat financial specialist however ensures your long-term financial stability, as they evaluate your financial and dual tax status as a US citizen, your risk tolerance and goals, and apply the experience while incorporating their currency management knowledge, too. Managing cross-border investments for a US expat is best undertaken by a global wealth manager who is familiar with the unique requirements of globally mobile clients. An expat finance specialist is aware of the effects of the laws that specifically influence US citizens residing abroad, like the Foreign Account Tax Compliance Act, US citizenship-based taxation, expatriation and other regulations. Similarly, insurance options change when one moves across borders. A US expat may also face issues with their retirement funds and social security accounts. When you move abroad, you may need to strategically rebalance your portfolios, figuring out the best cross-border tax-efficient investment options, retirement accounts, estate planning, currency management, insurance, charitable giving and compliance. Only an expat specialist financial advisor will be able to help you do this in the most convenient, beneficial and tax efficient way possible. Before meeting with a financial advisor, determine which areas of your financial life require assistance. You should be prepared to describe your specific needs and goals when you first meet with an advisor. Thus, it is crucial to have a precise list of requirements in mind. Expat financial advisors offer services in several fields. For example, they offer advice on cross-border investments, ensuring that your portfolio remains risk-appropriate and tax-efficient, and minimizing your currency exposure long-term. Expat financial advisors may also review your insurance policies to find coverage gaps or suggest new policies. Therefore, it makes sense to determine your requirements, risk tolerance and goals first to ensure that your expat financial advisor is a good fit for your needs. Finding an expat financial advisor Expat specialist financial advisors based outside the US won’t be subject to federal regulation (other than relating to investments they make in the US). As such, it is important to ensure that they are regulated in the country where they’re registered. You should start by searching online to find some options, then further research their client reviews and backgrounds, and, if possible, fee schedules. Additionally, talk to other expats who have been using the services of the expat financial advisors that you’re considering using to manage your finances. Having a good relationship with your expat financial advisor is important, so getting first-hand feedback as to their personality, working practices and effectiveness is a must. What to ask your prospective expat financial advisor Once you’ve found a potential expat financial advisor, it is essential to meet with them to discuss your requirements. Here are five important questions to ask them when you meet to ensure they’re the right fit for you. 1. What are their credentials, qualifications and experience Financial advisors are subject to regulation in almost all countries in different areas such as accounting services, investment advice, and financial planning. In addition, depending on the kinds and amounts of assets they manage, they might also be required to register with certain regulatory national bodies. Also check if they possess the right personal qualifications and certifications to be your expat financial advisor. While financial advisor firms may not legally require certifications, it is certainly preferable. It is of course also essential that they have significant experience and expertise working with American citizens in the country where you live. 2. What are their personal and firm values It’s beneficial to ask your expat financial advisor about their personal and firm values and vision. They will have immediate access to your most private information, goals, and plans. Thus, if your values are compatible, it will give you the confidence to put your funds in their hands. For example, you may have ESG (ethical, social and governance) investment preferences that you will want them to be able to cater for. On the other hand, if their values are dissimilar from yours, they may not be a good match for you. 3. What is their investment approach Financial advisors are responsible for recommending and selecting investments for you. You can ask them what approach they take to this, and how they sort through the thousands of available potential assets to create a suitable portfolio that will meet your requirements. Your financial advisor will gauge your risk tolerance before suggesting any investments. Most advisors use model portfolios that they customize to each client's needs and preferences. You should have a fundamental grasp of your advisors' investment philosophy, as it will influence asset selection. Ensure that you are comfortable with the investment strategy that your advisor uses. This question will also reveal whether your financial advisor has a coherent, empirically supported plan that can be shared. 4. What is their communication policy Communication is the key to good relationships, and asking how an advisor would communicate will reassure you that you can check on your investments, that they will be responsible, clear and transparent when you have questions, and let you better comprehend their way of operating. This question can include asking for details like how often you two would meet, the mode of meetings, and how often they will update you on your portfolio performance. 5. What is their fee structure Last but not least, ask about their fee structure. Always inquire about a financial advisor's fee schedule, method of payment, and inclusions before choosing one. Financial advisors receive varying types of compensation, that may include transaction fees, commissions, and portfolio-based percentages. Advisor fees reduce your portfolio gains, so you will want to ensure that you are aware of what they are, and that they are competitive and appropriate for the service and performance you are benefiting from. If you have any questions, don't hesitate to contact us. DUNHILL FINANCIAL, LLC IS A REGISTERED INVESTMENT ADVISER. INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN. Copyright © 2023 Dunhill Financial. All rights reserved.

By claiming the Foreign Tax Credit, many expats won’t owe any US taxes. Whether this is true for you depends on several factors, notably where you reside and whether you pay or accrue foreign income taxes. In this article we’ll look at how the Foreign Tax Credit works, how to claim it, and whether it’s the best option for you. In this article, you’ll learn about: • What is the Foreign Tax Credit? • What types of foreign taxes can you claim credits for? • How to claim the Foreign Tax Credit? • How to file IRS Form 1116 • What is the Foreign Tax Credit Carryover? • Should you claim the Foreign Tax Credit or the Foreign Earned Income Exclusion? • Roth IRAs and the Foreign Tax Credit • Can you claim the Child Tax Credit and the Foreign Tax Credit? What is the Foreign Tax Credit? The Foreign Tax Credit is an IRS provision that helps expats can claim to reduce their US tax liability. Claiming the FTC gives expats US tax credits based on the equivalent value of foreign income taxes that they’ve paid abroad. This means that if you’ve paid higher rates of income tax abroad in your host country compared to the US tax rates, you generally will not owe any US tax. This applies to most expats who are residents in European countries as well as Canada, or any other country with higher income tax rates than the US. The Foreign Tax Credit isn’t applied automatically; you have to claim it when you file your US federal tax return from abroad each year. There are a number of restrictions, qualifications and other factors to consider though, including whether it’s preferable to claim the Foreign Earned Income Exclusion and/or the Foreign Tax Credit. What types of foreign taxes can you claim the FTC for? There are some limitations in terms of which foreign income taxes you’ve paid that you can claim US tax credits in lieu of, namely: 1. The tax must be imposed on you To claim the Foreign Tax Credit, the foreign taxes must have been imposed on you, which means that you are legally obliged to pay them. This includes income taxes deducted from your wages at source, as well as those you have to pay when you file at the end of the tax year. 2. You must have paid (or accrued) the foreign tax You are required to have actually paid or accrued the foreign income tax at the time you are claiming the FTC, and you must be able to demonstrate this to the IRS. 3. The tax must be the legal and actual foreign tax liability The amount of US tax credits you can claim with the FTC cannot exceed the exact amount of tax you were legally required to pay in the corresponding period. So, if you overpay a foreign tax for example, either unintentionally or because you are required to pay an estimated amount in advance for the next tax year, you couldn’t claim the FTC on the additional amount despite having paid it. 4. The tax must be an income tax Examples of taxes that might seem like an income tax but that aren’t creditable with the Foreign Tax Credit are foreign social security taxes, wealth taxes, fines and penalties, and inheritance taxes. Special care is to be taken and expert advise should be sought in your residence country. For example, if you like in France the CSG (Cotisation sociale generalisée) and the CRDS (Contribution de Remboursement de la Dette Sociale) are considered for US tax purposes to be the equivalent of income taxes, irrespective their being referred to in France as social charges. - Jonathan Hadida, Hadida Tax 5. Paid or Accrued As mentioned earlier, the foreign tax must have been either be paid or accrued in the tax year. The question as to whether you should claim on the paid or accrued basis depends on where you live and your plans in the future. For example, a taxpayer in the UK is more likely to be on the paid basis as opposed to a taxpayer in many other countries due to the UK’s odd (April 6-April 5 tax year). Guidance from a tax professional is recommended to be sought. How to claim the Foreign Tax Credit? To claim the Foreign Tax Credit, you are required to file IRS Form 1116 with Form 1040. Form 1116 is used for claiming the Foreign Tax Credit for individuals, estates, and trusts. There’s a separate form for claiming foreign corporation tax credits, IRS Form 1118. Filing IRS Form 1116 You have to file a separate Form 1116 for each type of income you have, such as general limitation income (e.g. employment income) and passive income (e.g. from rents or dividends). You will also need to file multiple Form 1116s if you have income in more than three different countries. Before adding your income to Form 1116, you have to convert it to US dollars, generally using the average FX rate for the year. Form 1116 is a two page form with four parts. It’s not a simple form, and most expats should seek professional assistance. In Part I, you input your foreign income and the deductions and expenses relating to that income. In Part II, you report the foreign income taxes you’ve paid or accrued, in US dollars. In Part III, you work out the amount of the US tax credits you can claim, looking at such elements as the income already excluded by the foreign earned income exclusion. In Part IV, you report figures from any other Form 1116s you are filing, if applicable. Due to the complex nature of this form, we highly recommend the use of a tax professional. Is the Foreign Tax Credit a refundable credit? No, the Foreign Tax Credit is not a refundable credit, so if you paid more foreign income tax than the US tax that you owe, you cannot claim the difference as a refund. The difference can be carried over to future years or carried back one year, however. What is the Foreign Tax Credit Carryover? If you can claim more US tax credits than the US tax you owe with the FTC, the difference is known as the FTC ‘carryover’ amount, and you either can carry it back to the previous year, or carry it forward for up to 10 years. So for example, if you are single and live in the UK in 2022 and earned the equivalent of $100,000, your UK tax would be approximately $24,800 . If you file Form 1116, you would receive $24,800 of US tax credits. Your US income tax liability would be approximately $15,000 though. This means that you can carry over the difference of approximately $9,800 ) of US tax credits to carry forward. While you may not need to use the Foreign Tax Credit carryovers while you’re still in the UK, you can carry them forward for up to 10 years, or. They may come in handy should you move to a lower taxed jurisdiction or should you receive a tax free payment in your country of residence (e.g. a tax free severance payout in France). Additionally, if you did not have enough foreign tax credits to offset your foreign sourced income in the preceding year, you may be able to carry back the foreign tax credit (one year.) Again, assistance from a tax professional is always recommended. Should expats claim the Foreign Tax Credit or the Foreign Earned Income Exclusion? One of the most common questions that expats should ask is whether they should claim the Foreign Tax Credit or the Foreign Earned Income Exclusion, or both?. While the FEIE can only be applied to earned income, and only up to a maximum threshold, the FTC can be applied to any income that has been taxed abroad and up to a value dependent on the value of the foreign income taxes that you’ve paid. As an example, if all of your income is from employment abroad and your total earned income received is less than the FEIE limit, you might claim the FEIE, especially if you haven’t had to pay foreign income taxes (or if you paid foreign tax at a lower rate than the IRS rates), perhaps because you live in a country with low or no income taxes, or if you’re a digital nomad and you travelled between different countries working remotely without becoming a tax resident anywhere. If you paid foreign income tax at higher rates than the US rates however, or if your income is more than the FEIE limit, and if you have different income types, you are often better off claiming the Foreign Tax Credit. There are circumstances when you might also claim both to apply to different types of your income. The best advice is to have a conversation with your expat tax professional. Ron rented out his apartment in Florida and moved to London, UK in December 2021, to take the opportunity to live in Europe for a while thanks to working remotely. In 2022, his income from employment was $140,000. As his income from employment is more than the Foreign Earned Income Exclusion limit for 2022 and he also has passive income from rent from his apartment in the US, and UK income taxes are higher than US rates, he claims the Foreign Tax Credit, which eradicates his US tax bill and leaves him with excess US tax credits that he can carry forward and use when he returns to live in the States. Roth IRAs and the Foreign Tax Credit Just like in the US, expats can contribute to Roth IRAs from taxable income to receive tax-free distributions when they retire. If you claim the Foreign Earned Income Exclusion though, your taxable income may be reduced to zero, meaning you can’t make Roth IRA contributions. If you claim the Foreign Tax Credit on the other hand, you can generally, make these contributions (subject to other terms of Roth IRA eligibility), so retirement planning may be a factor that affects the decision of which to claim. Can you claim the Child Tax Credit and the Foreign Tax Credit? The Child Tax Credit lets American parents of dependent children who have US social security numbers claim a $2,000 tax credit per child. This applies to expats too (although the additional Child Tax Credit amount and advance payments provided as part of Covid-19 relief measures weren’t made available to most expats). If you have used the Foreign Tax Credit to reduce your US tax bill to zero already, you can still claim the Child Tax Credit and receive a $1,400 tax refund per child each year. If you claim the Foreign Earned Income Exclusion on the other hand, you won’t be able to claim the refundable part of the Child Tax Credit, so this can be another factor that determines which is best to claim. If you have any questions, don't hesitate to contact us. DUNHILL FINANCIAL, LLC IS A REGISTERED INVESTMENT ADVISER. INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN. Copyright © 2023 Dunhill Financial. All rights reserved.

“America is a land of taxation that was founded to avoid taxation.” - Laurence J. Peter In this article, we’re going to provide a comprehensive overview of the Foreign Earned Income Exclusion, one of the primary means of reducing your US tax bill as an American living overseas. In this article, you’ll learn about: • What is the Foreign Earned Income Exclusion? • How to qualify for the Foreign Earned Income Exclusion • What is a tax home? • What is the Physical Presence Test? • What is the Bona Fide Residence Test? • What is foreign earned income? • How to claim the Foreign Earned Income Exclusion • Filing IRS Form 2555 instructions • What is the Foreign Housing Exclusion or Deduction? • Foreign Earned Income Exclusion FAQs What is the Foreign Earned Income Exclusion? The Foreign Earned Income Exclusion is an IRS provision that allows Americans living abroad to exclude their earned income from US tax. Unfortunately, however, the FEIE isn’t a silver bullet that automatically cancels an expat’s US tax bill. This is because the FEIE isn’t applied automatically, but has to be claimed each year by filing a Form 2555 when you file your US federal taxes. Furthermore, there are a number of restrictions on who can claim it and what income can be excluded, so whether or not it’s worth claiming the FEIE depends on each expat’s individual circumstances. For example, many expats benefit more from claiming the Foreign Tax Credit instead; in fact, under certain circumstances, it’s even worth claiming both. Another potential drawback of claiming the FEIE is that it only lets you exclude up to a certain amount of your income. Every year, the IRS adjusts the maximum amount you can exclude for inflation, illustrated as follows: • In 2020, the maximum was $107,600 • In 2021, the maximum was $108,700 • In 2022, the maximum was $112,000 • In 2023, the maximum is $120,000 You can revoke your choice to claim the FEIE in any tax year by attaching a statement to your current tax return or, to an amended prior year return detailing your decision. It’s notable that if revoked, you may not be able to claim the FEIE for the next 5 tax years. There is a process to request approval from the IRS if you wish to claim the FEIE within that 5 year period however, it can be complex, time consuming and doesn’t always result in a successful outcome. Therefore, when revoking it’s important to consider your anticipated tax residence and earned income position for the proceeding 5 year years. - Josh Reeves, Moore DM How to qualify for the Foreign Earned Income Exclusion To establish whether you can claim the Foreign Earned Income Exclusion, there are several concepts that allow the IRS to determine whether you qualify as living abroad. These concepts include where your Tax Home is, and whether you meet either the Physical Presence Test, or the Bona Fide Residence Test. We’re going to look at these concepts in more depth, but the purpose of them is to ensure that the FEIE is only claimed by Americans who genuinely live abroad. The other factor is the types of income you have, as the FEIE only lets you exclude earned income. Earned income includes all income from employment, self-employment, or any other compensation for a service you’ve provided in the same tax year, and therefore also includes tips, bonuses, and benefits in kind such as accommodation, transport costs, and meals. What is a Tax Home? To claim the Foreign Earned Income Exclusion, your Tax Home must be in a foreign country. US overseas territories and dependencies aren’t considered to be foreign countries. Your Tax Home is normally the place where you are when you work, assuming you work in one place. If you work in different places, for example if you travel a lot, then the place where you normally live is considered your Tax Home. So if you live in the US but are posted abroad for 6 months, it is unlikely that you will be able to qualify for the FEIE, as your Tax Home will still be in the US. If you move abroad and set up a home in another country on the other hand, then you have moved your Tax Home, and you therefore qualify. The difference can come down to whether or not you can prove that you have settled in another country, such as by opening a bank account, joining local clubs, owning a car, or shipping your belongings, perhaps. Giving up or renting out your old home in the US is also a helpful indicator. Pilots and mariners who spend the majority of their time in the air or at sea outside the US don’t normally qualify for the FEIE, as they don’t move Tax Home to another country. This is also true for US astronauts, such as those on the International Space Station. Famously, Jack Swigert, one of the astronauts on the Apollo 13 mission, suddenly realized that he hadn’t filed for an extension after lift off, and radioed Houston in a panic. He soon had bigger issues to think about, of course. What is the Physical Presence Test? Once you have established that your Tax Home is abroad, to claim the FEIE you also have to meet either the Physical Presence Test or the Bona Fide Residence Test. The Physical Presence Test means that you spent at least 330 days outside the US and in another foreign country in a 365 day period. This period normally refers to a tax year, but it doesn’t have to, so if you move abroad (or back to the US) in the middle of a year, for example, you can claim the FEIE for the next (or previous) 365 day period. 330 days means 330 full days, meaning that days in which you are travelling from or to the US don’t count. Days when you aren’t in any other country, such as if you were at sea on a cruise, also don’t count as being outside the US for the purposes of claiming the FEIE, either. What is the Bona Fide Residence Test? Alternatively, you can qualify for the FEIE through meeting the Bona Fide Residence Test. The Bona Fide Residence Test means you are resident in another country for at least a year, including a tax year, and with the intention to stay there for an extended period or indefinitely. The definition is deliberately vague, and the onus is on the expat to demonstrate that they are a resident of another country to meet the test. Typically, this means proving that your permanent home is in a foreign country and you have an active bank account there, and you have the legal right to reside there, or you pay foreign taxes there. What is foreign earned income? Once you have met one of the two tests for living abroad, you can claim the FEIE, but you can only exclude foreign earned income. Earned income, as mentioned above, includes salaries, wages, commissions, bonuses, professional fees, self-employment income, and tips. Unearned or passive income can’t be excluded using the FEIE however, including rents, interest, dividends, pensions, gambling winnings, and social security payments Earned income is considered foreign earned income if your Tax Home is outside the US, regardless of where in the world your income is paid, including the US. The only exception is any income you earn when physically working in the US, which isn’t considered foreign earned income. If you claim the Foreign Earned Income Exclusion and exclude all of your income, you may not be able to make contributions to a Roth IRA retirement plan, as contributions are allowable based on your taxable income. How to claim the Foreign Earned Income Exclusion Once you have established that both you and your income qualify, to claim the Foreign Earned Income Exclusion you have to file IRS Form 2555 at the same time as your Form 1040 every year (i.e. the same filing deadlines and extension rules apply). Filing IRS Form 2555 instructions Form 2555 is a relatively short 3-page form, however most expats seek assistance from an expat tax specialist to ensure that they get planning advice as well as fill in the form correctly. Part I requests details about you and your employer. You then fill in either Part II or Part III, depending whether you are using the Bona Fide Residence Test (Part II) or the Physical Presence Test (Part III). In Part IV, you enter details about your foreign earned income amounts and your expenses. These figures correspond with those you put on Form 1040. Part V is for if you are also claiming the Foreign Housing Exclusion or Deduction (more details about this are below). If you are, enter further details in Part VI. The final three parts, VII, VIII, and IX, are for the exclusion calculations, using the figures from the previous sections. What if the FEIE isn’t enough? If you are claiming the Foreign Earned Income Exclusion, are renting your home abroad, and your income exceeds the FEIE maximum threshold, you can also claim the Foreign Housing Exclusion (or the Foreign Housing Deduction if you’re self-employed) to exclude more of your income from US tax. The FHE is also claimed using Form 2555. The Foreign Housing Exclusion (or Deduction) lets you exclude a proportion of your unavoidable housing expenses, such as rent and utilities. The IRS uses a complex formula to determine the amount of your housing expenses that you can exclude (or deduct), which also takes into account where you live, as rental costs are higher in some places than others. There are other credits and exclusions available to expats too, depending on your circumstances, so always discuss your options with your expat tax professional. Foreign Earned Income Exclusion FAQs Can expats reduce US self-employment taxes with the FEIE? No, the FEIE just lets you reduce US federal income tax, so self-employed expats are still liable to pay US self-employment taxes if they claim the FEIE. These may however be covered by a double taxation agreement between the US and the host country where the expat lives. Can expats claim both FEIE and the US Foreign Tax Credit? In theory yes, however expats can’t apply the FEIE and the FTC to the same income. So for example if you live and are employed in a foreign country and you also receive rental income from an apartment in the US that is also taxed in the country where you live, it could make sense to claim both and apply the FEIE to your employment income and the FTC to your rental income. Whether this would be the best approach would depend on the specific details of your situation, though. Can expat parents claim the FEIE and the US Child Tax Credit? No, expat parents can’t normally claim the FEIE and the refundable part of the US Child Tax Credit, so it often makes more sense for expat parents to claim the Foreign Tax Credit rather than the FEIE, assuming doing so will also reduce their US tax bill to zero. If you have any questions, don't hesitate to contact us. DUNHILL FINANCIAL, LLC IS A REGISTERED INVESTMENT ADVISER. INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN. Copyright © 2023 Dunhill Financial. All rights reserved.

The IRS adjusts various tax exemptions and thresholds each year to ensure that they keep up with inflation. For example, expats should note that the Foreign Earned Income Exclusion limit has risen to £112,000 in 2022 (so for filing in 2023), and will rise to £120,000 in 2023 for filing in 2024. They have also adjusted the gift tax annual exclusion and the lifetime exemption/estate tax exemption, and there are several ways to make use of the new higher thresholds, according to Dunhill Financial. The annual gift tax exclusion per donee has been raised to $17,000 per person for 2023, the company writes. That’s up from $16,000 for 2022 and $15,000 for the years 2018 to 2021. The lifetime gift tax and estate tax exemption, meanwhile, has increased to $12.92 million for 2023. That’s up from $12.06 million for 2022 and $11.7 million for 2021. If Congress doesn’t take action however, in 2026 the lifetime exemption will revert to 2011’s original $5 million (adjusted for inflation). This is because it was raised in 2017 with a ‘sunset clause’ in 2025. So for anyone who dies in 2023, their estate won’t be taxed if its total value is less than $12.92 million. With the possible lower rate coming in just a couple of years' time, even if your total assets (including property) are worth less than this amount, it may be advantageous to think about gifting over the next couple of years, potentially into trust or company structures, to avoid possible future taxes. In the meantime, several planning strategies are available to take advantage of the higher thresholds.“A benefit to using the exemption during lifetime is that any appreciation of the asset given away is also outside of the individual’s estate for estate tax purposes at death,” whether the gift is made either to an individual or to a trust, according to Dunhill Financial. Expats can also tap the spousal lifetime access trust, popular for married couples because grantors can keep an indirect benefit from the irrevocable trust, allowing for distributions from the trust to provide income for the couple, the company says. Moreover, in such trusts the grantor pays taxes personally on behalf of the trust, which lets the trust grow without incurring the income tax. Other expats may be better served by a descendants trust, in which the grantor’s spouse isn’t a beneficiary, the company says. Such trusts can be set up to either have the grantor or the trust responsible for the income tax and are “very flexible” overall because they allow the grantor to designate the assets according to their wishes. Expats could take advantage of the higher exemption by tapping life insurance for offsetting state or federal estate taxes that could be due upon their death, including through the use of irrevocable life insurance trusts and second-to-die policies. If you need assistance with your long term financial planning including estate tax planning, don’t hesitate to get in touch. If you have any questions, don't hesitate to contact us. DUNHILL FINANCIAL, LLC IS A REGISTERED INVESTMENT ADVISER. INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN. Copyright © 2023 Dunhill Financial. All rights reserved.

No, there are more important economic indicators and factors to consider. Eggs are a staple food item in households around the world, providing a rich source of protein and nutrients for a relatively low cost. However, the cost of eggs has recently skyrocketed, leaving many consumers struggling to keep up with the rising prices. In fact, according to data from the Bureau of Labor Statistics, the cost of eggs in the US has risen more than any other food item in the past year. Last year, the average price for a dozen large Grade A eggs in the U.S. was $1.93 in January. By December, the price had skyrocketed to $4.25. Reasons for the high cost of eggs There are several factors contributing to the high cost of eggs. One of the main drivers of this increase is the widespread avian influenza outbreaks in recent years. Avian influenza, or bird flu, is a highly contagious virus that affects birds, and it has caused widespread damage to poultry populations worldwide. This has led to a significant decrease in egg production, driving up the cost of eggs as supply struggles to keep up with demand. Another factor is the increasing demand for cage-free and organic eggs. Consumers are becoming increasingly concerned with animal welfare and are demanding eggs from chickens that are not confined to cages. As a result, many egg producers have switched to cage-free production methods, which are more labor-intensive and result in higher production costs. The cost of feed for chickens is also a significant factor in the high cost of eggs. Feed accounts for a large portion of the cost of egg production, and with the recent rise in grain prices, egg producers are struggling to keep up with the increasing cost of feed. This has resulted in higher costs for eggs, which are passed on to consumers in the form of higher prices. Additionally, the rise in egg prices can be attributed to increased demand for eggs as a source of protein. As consumers become more health-conscious and focus on eating a diet rich in protein, the demand for eggs has skyrocketed. This has put further pressure on egg producers to meet the growing demand, resulting in even higher prices for consumers. Cost of eggs indicative of the economy? The cost of eggs can reflect certain aspects of our economy, but it is not a comprehensive indicator of its overall state, because it is just one of thousands of factors that drives our economy. Additionally, while the cost of eggs can reflect local and regional economic conditions, it may not always accurately reflect the national economy. The cost of eggs can vary significantly across different regions, depending on local conditions such as supply, demand, and transportation costs. More important factors to watch The overall state of the economy is influenced by a complex and interrelated set of factors, and the more influential factors include: • Gross Domestic Product; • Inflation; • Employment Figures; • Wages; • Industrial Production; • Home Sales; • Home Building; • Consumer Spending; • Manufacturing Demand; • Goods and Services Deficit; • Retail Sales; and • Government policies, among others. While the cost of eggs can provide some insight into the US national economy, it is not a comprehensive indicator of its overall state or a harbinger of a pending recession. There are just too many more important economic indicators and factors to consider. If you have any questions, don't hesitate to contact us. DUNHILL FINANCIAL, LLC IS A REGISTERED INVESTMENT ADVISER. INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN. Copyright © 2023 FMeX. All rights reserved. Distributed by Financial Media Exchange.

"A fine is a tax for doing something wrong. A tax is a fine for doing something right." - Anonymous Expats have to file US federal taxes from overseas, but what about state taxes? The answer isn’t a straight yes or no unfortunately, as it depends on several factors that we’ll explore in this article, but state taxes should be part of your research as you plan your move abroad. In this article, you’ll learn about: • Which expats have to file state taxes? • How is state residency defined for expats? • States where it doesn’t matter • States where you’ll need to do something • Sticky States • Preparing to minimize state taxes when you move abroad Which expats have to file state taxes? Whether or not you are required to file state taxes as an expat depends on in which state you resided permanently before moving abroad. To put it another way, the rules of the state that you were considered a resident of will decide your obligations regarding state taxes once you live overseas. If that state still considers you as a resident, then you have to file state taxes from abroad. But how will you check your residency status according to your last state? How is state residency defined for expats? Every state has its own qualification criteria. Most states look at how long you intend to be abroad for (or whether you intend to return to live in the state), however some look at the ties you have maintained in the state instead. Here is a list of ties that a state might make you liable to state taxes from abroad: Car registration State id or a driving license Voter registered Owning a property in the state Continuing to pay bill and services in the state Having dependents in the state Having a mailing address in the state (P.O. box or a relative’s house) Intending to return to live in the state (e.g. if you’re abroad on a temporary work placement) Maintaining bank accounts in the state, or other financial accounts or assets Receiving income in the state (e.g. from rent, dividends, or if you perform services remotely) In some situations, you might be required to file state taxes for the income earned from the state even if you don’t meet the criteria of being a resident. As such, it’s important to dive into the specifics in the state where you were last resident, and if you are still confused about your status, consult an expat tax expert. What's the best state for expat taxes? On discovering that they would be liable to pay state taxes after they move abroad, some expats move state first to one with more lenient rules to save money in the long run, especially with exemptions such as the Foreign Earned Income Exclusion allowing expats to reduce their federal US tax bill but there being no such exemptions for state taxes. States where it doesn’t matter There are states which have no state income taxes. If you last lived in one of these states, you won’t owe any state tax from overseas, even if you retain ties or receive income in the state. These are: Alaska Florida Nevada South Dakota Texas Washington Wyoming Furthermore, there are two states that only charge tax on interest and dividends earned by residents, being: Tennessee New Hampshire States where you’ll need to do something For the majority of states, other than those with no income tax and ‘sticky’ states, once you let them know that you’re no longer living in the state, they will be happy to let you go. This can be complicated by receiving income in the state or maintaining ties in the state, so it’s important to understand the rules in the state where you last lived and how they apply to you. Sticky States ‘Sticky’ states are the ones that don’t like to let you go! To avoid paying state taxes in these states, you will have to demonstrate that you have relinquished your ties to the state and you don’t intend to return. These states are: California New Mexico South Carolina Virginia New York Let’s assume that you were a resident of California, which is a sticky state. You then moved to France and now you want to assess your tax obligations. To not have any state tax liability at all, you will have to prove to the state of California that you will not be returning to the state. If you fail to do so, you will be liable to pay tax on your worldwide income. California also has a safe harbor exception. This means that you will be regarded as a non-resident if you have been out of the state for more than 546 days for employment-related reasons. If you can’t prove that you are not going to return, then you may well have to file a state tax return along with your federal tax returns every year from abroad. The residency definition in these states is comparatively very stringent, and if you fail to prove that you are not coming back, you will pay taxes on your worldwide income, irrespective whether you lived in the state during the year or not. Preparing to minimize state taxes when you move abroad Before moving, to reduce your state tax obligation, the first step is to research the rules of the state you live in to see whether you may have to file state taxes after you move. If you think you may have to pay state taxes from abroad, if you live in a ‘sticky’ state for example, you should seek professional advice from an accountant who has experience with expats. Most US CPAs won’t have this experience, so just asking your normal tax professional isn’t normally the best option. If you live in a ‘sticky’ state, and if you have time and it’s possible logistically for you, you might consider moving to a tax-free state such as Alaska, Florida, or Nevada. Make sure that you meet the criteria for becoming a resident in these states before moving abroad though, as well as meeting the criteria for not being a resident in your previous state. The best advice though is to always consult expat specialist tax and financial advisors, both before and after you move, to ensure that you are minimizing your state, federal and foreign tax liability. If you have any questions, don't hesitate to contact us. DUNHILL FINANCIAL, LLC IS A REGISTERED INVESTMENT ADVISER. INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN. Copyright © 2023 Dunhill Financial. All rights reserved.

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. DUNHILL FINANCIAL, LLC IS A REGISTERED INVESTMENT ADVISER. INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN. Copyright © 2023 Dunhill Financial. All rights reserved.

“Inflation is taxation without legislation.” - Milton Friedman 2022 saw inflation dominate the economic news, with some of the highest inflation rates seen for decades in the US and many other countries. Inflation isn’t an academic economic phenomenon, it affects us all, from the prices we pay in shops to the interest rates we pay on mortgages and loans, and investments, too. Expats will have experienced fast rising prices and another result of inflation is that a much stronger dollar may have affected their cross-border investments or money transfers. In this article, we’ll look at: • What is inflation? • What causes inflation? • How does inflation affect investments? • Inflation in 2022 and 2023 • Is inflation always bad? What is inflation? Inflation is defined as a long-term increase in the prices of goods that reduces the purchasing power of money. Between 1960 and 2021, the average annual inflation rate in the US was 3.8%. In June 2022, it reached 9%. Indexes like the Consumer Price Index and Wholesale Price Index reflect the inflation rate over time. Inflation directly impacts the cost of living, which in turn slows economic growth. According to economists' general understanding, prolonged inflation happens when a country's money supply expands faster than its economy grows. Thus, inflation levels can theoretically be controlled by increasing or decreasing the money supply in an economy. What causes inflation? Several factors can cause inflation. Here are a few examples: Cost-push inflation is a rise in the prices of goods and services due to the increase in prices of factors of production. This reduces the supply of goods, causing price increases. For example, when oil prices go up, it increases the general inflation rate because it is a significant factor in production of many goods, as well as transporting them (and transport in general). Demand-pull inflation is an increase in the price of goods and services due to increased demand. In this scenario, the aggregate demand in an economy is greater than the aggregate supply. Built-in inflation occurs when consumers anticipate that inflation will go up shortly. As a result, workers may demand more pay due to these common expectations. At the same time, higher earnings can boost goods demand, leading to higher prices. Money devaluation: Monetarists believe that as the supply of money increases in an economy due to the expansionary policy of central banks, its value goes down. When money's value declines, it loses some of its purchasing power, increasing the relative cost of goods. Measuring inflation There are different ways to measure inflation, but the most commonly used is the Consumer Price Index, which measures the increase in price of a ‘basket’ of essential goods and services including basic foods, gas and utilities. Another useful way to measure and compare inflation between countries is by using the Big Mac Index, which was originally introduced by The Economist magazine in 1986 to compare relative purchasing power between different countries based on just the price of a Big Mac in each country. The increase in the price of a Big Mac in each country is also a good indicator of inflation, though. How does inflation affect investments? Understanding the impact of inflation on investments is essential for expat investors, as the rate of inflation is a measure of how quickly an investment loses its real value over time. Thus, investors must ensure that their returns are higher or at least equal to the inflation rate to retain their value. Liquid assets are affected by inflation in the same ways as other types of investments, with the exception that the returns on liquid assets such as money are typically meagre compared to illiquid assets like shares and bonds. Liquid assets are, therefore, more susceptible to the damaging effects of inflation. As a result, higher inflation rates tend to result in people and corporations holding fewer liquid assets in the overall economy. Say you have $100 in your account. Your savings would increase to $105 if you earned a 5% interest rate. If inflation is 10% over the same period, an item previously priced at $100 will now cost $110. Despite the growth in your investments, you must spend more money because inflation has increased. Because the impact of inflation on illiquid assets is less than on liquid assets, people secure their savings by investing them in bonds and stocks. Inflation in 2022 and 2023 The global COVID-19 pandemic impacted economies negatively. The prolonged lockdowns reduced production and inhibited global freight transport. Businesses are currently attempting to resume normal operations or working to make up lost revenue. Because the pandemic reduced aggregate demand, there were many layoffs, which reduced disposable income. This spiral caused inflation to rise. In other words, the combination of high demand and inadequate supply following the pandemic has caused prices to soar. Economists aren’t all in agreement regarding the expected inflation rates in the coming months and years. Numerous analysts are confident that the current inflationary pressures will be short-lived and will soon subside. However, others are less optimistic, claiming that Americans—as well as people in the majority of the other developed economies—must adjust and be ready for higher inflation rates to become endemic. The more optimistic school of thought maintains that the current price hikes should be resolved as soon as supply chain constraints subside and the post-pandemic rise in demand to purchase items diminishes. The other school of thought believed that as slower-moving categories like rent join the trend of price hikes, the claim that price increases are only limited to industries impacted by pandemics is starting to falter. Furthermore, Russia’s invasion of Ukraine increased global oil prices, further increasing manufacture and transportation prices globally. Is inflation always bad? As long as it is kept under control, a little inflation is required to keep the economy expanding and generally regarded as healthy. This is because inflation reduces unemployment rates. However, if costs keep rising too quickly, it becomes a problem that needs to be addressed. Coupled with stagnant growth, it can lead to stagflation. Rapid inflation usually results in people cutting back on spending and eventually entering a phase that might lead to depression. There are both winners and losers when it comes to inflation. For example, people who have invested in assets such as gold and cryptocurrencies can benefit from inflation, as these types of assets can often spike in value during times of high inflation. There is also often a higher demand for physical assets, such as art and jewellery in times of inflation. Conversely, some of the assets that do badly in times of high inflation include cash (in savings accounts for example, as when prices increase, money loses value, reducing the savings' actual worth), and long-term bonds. Borrowers on variable rates also suffer, as central banks hike interest rates to combat inflation and retail banks follow suit by increasing the borrowing rate. As a result, homeowners with variable mortgage rates may experience considerable increases in their monthly mortgage payments. High and erratic inflation breeds uncertainty for customers, banks, and businesses alike. There needs to be more investment, which results in slower economic expansion and fewer job opportunities. Therefore, rising inflation over the long run is linked to worsening economic prospects. If you have any questions, don't hesitate to contact us. DUNHILL FINANCIAL, LLC IS A REGISTERED INVESTMENT ADVISER. INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN. Copyright © 2023 Dunhill Financial. All rights reserved.

We’re all well aware that we should save money for retirement, but many of us don’t know what to do or how it works. Don’t worry, you aren’t alone! This simple guide will help you understand the power of compound interest and how you can get started using it to your advantage today! What is compound interest? Compound interest occurs when the interest that accrues to an amount of money in turn accrues interest itself. Say a person opens a retirement account when they are 25 and saves $5,000 a year. Without compound interest, they will save $200,000 by the time they’re 65. With a compound interest rate at about 6% or higher, they’ll be a millionaire by the time they’re 65. That’s the power of compound interest! How does it work? All the glory of compound interest takes place in a retirement account, most commonly a 401(k) or an individual retirement account (IRA). Each type of retirement account comes with an interest rate (the average being between 8-10%) so you can calculate how much money will accumulate by the time you retire based on your age and annual savings. The most important factor to leveraging the power of compound interest is to begin as early as possible. It’s never too late to start, but the rate of return is the highest if you begin a retirement savings account in your 20’s. The longer you wait to start saving, the less time you have to accrue interest and build your savings. For the visual people out there, check out these charts that illustrate how your age affects your saving potential. How do I get started? All you have to do is open up a retirement account and start adding to your savings annually! You’ll need to start by choosing which type of account to open: 401(k): For most people, the best place to start is with the 401(k) program at work. This is a particularly enticing option if your employer matches a portion of your contribution (free money!). This is the easiest and most common way to begin saving for retirement, and all you have to do is sign up! Your employer does the rest and simply transfers money from your paycheck to your 401(k) account each pay period. IRA’s: If you are self-employed or your employer doesn’t offer a 401(k) program, then you’ll have to open up an individual retirement account. IRA’s are a little more complicated than 401(k) programs since you have to choose which plan is right for you and do a little more legwork, but they often come with better tax savings and give you the power to shop for the best interest rate. There are different types of IRA’s (traditional and Roth for individuals, SEP and Simple for small business owners). You’ll need to decide which type of IRA is the right fit for you before you can start shopping for an account provider. In summary, compound interest is simple, but important. Start saving as early as possible to see maximum benefits. We would be happy to help you get started, just email us on info@dunhillfinancial.com. DUNHILL FINANCIAL, LLC IS A REGISTERED INVESTMENT ADVISER. INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN. Copyright © 2022 Dunhill Financial. All rights reserved.

Dunhill Financial is proud to participate in an online event on financial planning for European expats in the US taking place on Wednesday October 26th at 6pm UK time / 1pm Eastern Time. Financial planning for expats living in America can be confusing, navigating different retirement plans, investment types, and with cross-border currency considerations, too. The topics covered in the event will include: Retirement planning: as an expat, should I utilize US retirement plans (IRAs, 401ks etc)? Investing: how should I structure my investments and should I take currencies into consideration when investing as an expat? Currencies: how can I mitigate volatility and minimize costs in currency exchange and transfer? The event is free to attend, and you can register at this link: https://www.eventbrite.com/e/expats-in-america-financial-planning-pitfalls-and-solutions-tickets-412800767207 The event will last an hour, including a 15 minute Q&A so you can put your questions to the experts. Drew Waterbury, Ocean Advisors Drew is a Certified Financial Planner with over 30 years of experience in financial services. He previously worked for New York Stock Exchange member firms before founding Ocean Advisors, LLC to help families who wish to create generational wealth through financial planning and investment strategies. Brian Dunhill, Dunhill Financial Brian is a Financial Planner with a core emphasis on concentrated positions and retirement planning for expats. Previously, he worked for prestigious Wall Street firms including UBS, Lehman Brothers, and A.G. Edwards. Kelly Cutchin, Moneycorp Kelly joined Moneycorp based out of their Orlando Florida Office in 2006. In December 2012, she took on the role of Country Manager for Moneycorp's USA operations, leading a team of foreign exchange experts and working closely with the firm's global offices. Book your place today at the above link. DUNHILL FINANCIAL, LLC IS A REGISTERED INVESTMENT ADVISER. INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN.