US green card\'s now more of a tax sword

[apricot]

Is the American dream losing its appeal? Though the US still continues to attract the best minds from the world over, including India, stringent tax laws are forcing many Indians to re-look at the decision to settle in a land that has for long been their dream destination .

This is reflected by the increasing number of Indians wanting to give up their green cards or US citizenship after the country?s heavy budgetary deficit and a drive to trace unreported income through tighter tax laws and disclosure norms.

Tax laws in the US empower the Internal Revenue Service, the apex body for US tax administration, to tax global incomes of those holding US citizenships or the green card. As a result, Indians who hold a US citizenship or green card, face the threat of being taxed in the US for income generated in India, even if the Indian business has no territorial nexus with the US.

For example, many Indians in the US send money back home, which is invested in the stock market in India, where dividend and long-term capital gains are tax exempt.

Nevertheless, they are liable to pay tax in the US for income generated in India. According to reports published internationally, over 500 US citizens had given up citizenship in the last quarter of 2009, to settle in convenient destinations. This figure was almost double the number of people who severed ties with the US in 2008.

For more details....

http://economictimes.indiatimes.com/news/news-by-industry/services/travel/visa-power/US-green-cards-now-more-of-a-tax-sword-for-Indians/articleshow/6686588.cms

[direstraits88]

Avoid paying taxes now but demand social security benefits later. Sounds like the "tea party" slogan to me.

[gwldaddu]

Avoid paying taxes now but demand social security benefits later. Sounds like the "tea party" slogan to me.

Not sure if I completely understand your statement here... Can you explain? Who is trying to avoid paying SS taxes and then reap the rewards later?

OP Is regarding Fed taxes on foreign income. This income does not come under SS Taxes in anyways...

[Hyd ki]

I did not understand much from the article.

Can someone please tell, at what point, this taxation comes into effect?

For example, if a person is earning 10 lakhs in India, does he have to pay tax for that money in US also?

Or is there any money limit that one has to cross to start paying tax for US also?

Forgive my ignorance, as I understand, I have to pay tax to both India and US on my income in India, this sound ridiculous.

One R2I member was informing that up to 91k, its not taxable. If you cross that, the taxation comes into effect. Please correct me.

[nj2vb]

Me either. I know there are MTs on the forum which discuss this in detail. Can someone please point them out? Many thanks.

[gwldaddu]

If you read money forums here.. you will get your answers..

Hyd ki, if you are earning 10 lakhs in India, you will not be paying tax in USA... That was a short answer.. for further details, search "Foreign Tax Credit", "Dual Taxation Treaty", "Taxation for NRA" etc in money forums.

[dbs]

I For example, if a person is earning 10 lakhs in India, does he have to pay tax for that money in US also?
One R2I member was informing that up to 91k, its not taxable. If you cross that, the taxation comes into effect. Please correct me.

The exemption is only for earned income. Unearned income such as interest, dividends, rental, etc. may still be taxed.

[gurusw]

Hyd Ki,
you have to familiarize yourself with dual taxation laws. There is no shortcut.
There is no straight-forward exclusion for 91K of foreign earned income either. Beware of the stacking rule:
http://www.r2iclubforums.com/forums/showthread.php/456-MT-US-laws-on-Foreign-Earned-Income-Exclusion

[returning_indian]

[QUOTE]If you have your full time residence abroad for a full calendar year, or live there for 330 days out of any consecutive 12 month period, you can exclude up to $87,600 of earned income from U.S. Income Taxation for 2008 and lesser amounts in earlier years. If you are married, and both of you earn income and reside and work abroad, you can also exclude up to another $87,600 of your spouses income from taxation. These exclusions can only be claimed on a filed tax return and is not automatic if you fail to file your Form 1040 for the year it applies as well as the appropriate forms claiming this exclusion. This is a fantastic advantage for people who live and work outside of the U.S. Earned income is that paid you for your work or services and does not apply to rental income, dividend or interest income, or other types of income that is not paid for your own personal efforts.
http://www.taxmeless.com/page4.html

[direstraits88]

Not sure if I completely understand your statement here... Can you explain? Who is trying to avoid paying SS taxes and then reap the rewards later?

OP Is regarding Fed taxes on foreign income. This income does not come under SS Taxes in anyways...

Folks hold onto USC status for a reason. Access to Medicare/SS benefits are prime reasons. From a tax perspective, how does it matter where the money is earned? I can buy an argument for lesser taxes overall.

But selective taxation reminds me of WSJ/CNBC justification for lesser taxation of "passive" income like dividend. The new capitalist mantra is work hard, earn little and pay more taxes as a percentage of your income. Or Earn it all as dividend (like most hedge funds) and pay less/no taxes.