Non-US Investing • Before filing I-407 and trigger form 8854 (am I missing something?)

A bit short on time, but some quick thoughts below ...

I checked all the accounts and using 50% share of everything that is owned or owed jointly I end up well under $1 million, so the Covered Expatriate status does not seem like it will be a concern.

Sounds okay, but double and triple check. The US's exit tax is an abomination, and nobody should pay it.

We are debating the pros/cons of transferring ownership of the house into my name only to avoid the possibility of capital gains taxes in the future.
It is currently valued 8% lower than our adjusted basis in USD (but 10% higher in NOK).

Is this something that we would need to do while I am a US Person? Even if I have the entire house, and only half of the mortgage, I would still be under the threshold for the Covered Expatriate status.

No benefit, as far as I can see. The US gift tax has an unlimited marital exemption only where the receiving spouse is also a US citizen. Otherwise, the gift tax kicks in on gifts over $185,000 (for 2024) to non-citizen spouses; either US permanent residents or nonresident aliens; doesn't seem to matter. There is a handy table here.

Either way then, if you do this -- and it may be useful to do it -- your wife will perhaps burn through some of her sizeable US citizen's estate and gift tax exemption. Some tedious IRS paperwork, but no tax to pay (at least, not unless your house is worth more than around $26m!)

In 2025, I am considering withdrawing the 401k as I may do so without US taxes under the tax-treaty. Is there any reason to try to move this to an IRA first?

I'm not familiar with the US/Norway treaty specifically, but as a general rule, most treaties seem to treat IRAs and 401ks equally, for either good or otherwise.

Should we have any investments or interest income in the US, it seems to be advantageous for the non-US spouse to own this, to avoid double taxation (or avoid filing 8833 to have US income re-sourced, if even possible), and take a credit against taxes paid to the US (filing 1040-NR).
Is there any practical point in trying to achieve this? Would then need to find a broker willing to deal with a foreigner that also is not a resident.

Norway does not have a US estate tax treaty, meaning everything 'US situs' above a miserly $60k is at risk. As long as your US citizen wife is the sole beneficiary, there wouldn't be any actual US estate tax payable (unlimited marital deduction), but if that's not the case -- your wife renounces her US citizenship, you name children or other non-spouse persons as beneficiaries, etc -- then you could well face US estate taxes.

Rather than this, it could instead be simplest for you (non-US spouse) to own this, and then use equivalent non-US domiciled funds or ETFs, rather than the US domiciled ones you currently hold. This has the added benefit of cutting the IRS out of your investing entirely, so that you can hold non-US domiciled funds, any Norwegian (or other country) accounts that are locally tax-advantaged or tax-free, and so on. The ease with which you can do this may depend on how much unrealised gain you have in what you already hold; although, bear in mind that what you hold now is presumably US domiciled, and so may become a US estate tax risk once you have ditched the green card.

In particular, note that once you are no longer a US citizen, your IRA and 401k accounts are considered to be 'US situs' for the US estate tax, no matter what they contain.

Finally, if you haven't already found it, this wiki page has a short section on disconnecting from the US and the IRS:

US tax pitfalls for a non-US person moving to the US - Bogleheads

All of the above with the disclaimer that I'm not a US citizen, not married to a US citizen, am happily free of the IRS and have been for more than a decade, and while I know a decent amount about the US/UK tax treaties, I know nothing about the US/Norway one.

Statistics: Posted by TedSwippet — Sun Apr 21, 2024 5:23 pm — Replies 1 — Views 60

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