Planning for Taxation
This section recommends several strategies that EB-5 immigrant investors can use when planning for the taxes they will be assessed following immigration and resident status.
- Be aware of capital gains taxes. Once a residence has begun, an immigrant investor will be charged capital gains taxes on the difference between sale cost and purchase cost of any assets. To avoid this, investors may want to sell the assets for fair market value before immigrating.
- Identify income received from outside the United States prior to immigration. Investors are not taxed on this income, so they may want to implement strategies to maximize this income prior to immigration, such as requesting early pension payouts and distributing profits from foreign corporations before residence begins.
- Defer any expected expenses and losses until after residence begins. Any business and personal losses and expenses incurred after the date of resident status qualify as tax deductions, which can be subtracted from any capital gains that the investor has received.
- Set up a foreign trust before becoming a permanent resident. Foreign trusts are non-taxable as they are not classified as U.S. assets. In addition, assets can be easily removed from a foreign trust without being subject to taxes before residence begins. Investors should be aware, however, that any trust amounts distributed to individuals in the United States must be reported and are subject to interest. Also, it is important to remember that capital gains earned as a result of the trust are taxable and if the trust was established within five years of the investor obtaining resident status, it is taxed as a “grantor” trust. If this happens, standard income taxes apply instead of estate taxes.
Summary of Tax Planning Recommendations
Interested immigrant investors should thoroughly review the tax laws of both the United States and their home countries when planning for taxation. Tax attorneys are available for consultation to assist investors in identifying the best strategies for their individual situations. By learning tax law before becoming a resident, an EB-5 investor can implement strategies such as those listed to reduce the amount of taxes they will have to pay when residing in the United States.