U.S. Tax Tips
If you, like many U.S. expats (U.S. citizens and Green card holders living outside the United States) are becoming more frustrated, confused, or overwhelmed with the massive burden that U.S. citizenship may entail when you are living outside the United States, you may have considered renouncing your U.S. citizenship.
An Individual Taxpayer Identification Number or ITIN, is a tax processing number issued by the Internal Revenue Service (IRS) which is designed for foreign individuals (non US-persons) who are required to file a US federal tax return, or have other IRS filing requirements, but are not eligible for a Social Security Number (SSN).
IRS Form 3520 A is often filed by Canadian tax advisors with respect to Tax Free Savings Accounts (TFSAs) that are held by U.S. person. However, the tax treatment of TFSAs for U.S. federal income tax purpose is uncertain because there is there is no case law and no clear guidance by the IRS.
Owning U.S. real estate can result in significant benefits for Canadians and can open up a primary or secondary source of income. However, it is important to understand the complexities involved in purchasing and owning U.S. real estate for Canadian individuals and businesses.
To the disappointment of many the Tax Cuts and Jobs Act did not repeal the u.s. estate tax. What it did do is double the base exclusion amount for 2018. The basic solution amount will be eleven point two million dollars per person and twenty two point four million dollars per married couple. This is applicable for U.S. domiciliaries as well as Canadians with U.S. situs assets. The Canada U.S. income tax treaty provides for a prorated unified tax credit for Canadians. Canadians who have worldwide assets under the threshold amount will not be required to pay U.S. estate tax they will however be required to file U.S. estate tax return or U.S. gift tax return. This provision provides tax planning opportunities these need to be taken advantage of before the provision sunsets in 2025.
The Tax Cuts and Jobs Act increased the standard deduction for tax payers for single taxpayers from $6,350 to $12,000 for married taxpayers filing a joint return from $12,000 600 to $24,000. This will impact most taxpayers and it should reduce their overall tax burden. However, for taxpayers that have itemized deductions in the past they may actually increase their overall tax. The personal exemption was repealed as well in 2017 the exemption was four thousand and fifty dollars. Therefore, going from 2018 forward if a person’s income is less than $12,000 they won’t be required to file u.s. tax return. This change in the standard deduction impacts on U.S. residents and U.S. citizens and green card holders that are residing outside the United States.
The Tax Cuts and Jobs Act reduced individual income tax rates across the board. The highest marginal tax rate was reduced from thirty nine point six percent (39.6%) to thirty seven percent (37%). The income tax brackets were also compressed such as all taxpayers will have reduced tax rates. The highest margin rate for single taxpayer starts at five hundred thousand ($500k) and then for married taxpayers that file joint returns the highest marginal rate kicks in at six hundred thousand($600k). These reduction in the individual tax rates impact on Canadian residents that may otherwise be working in United States, U.S. citizens a green card holders expatriates that are residing in Canada and also U.S residents equally.