Moving to a foreign country can be a daunting and expensive undertaking. Many individuals are unaware that if the move to a foreign country is for employment the cost of the move may be deductible. The good news is that extra expenses are deductible when the move is foreign. In this case a “foreign move” is deductible when you move to start work where your tax home is outside of the United States. A foreign moves include a move from the United States to a foreign country, a move from one foreign country to another foreign country, or a move within a foreign county. Moving back to the United States has a separate set of rules.
The biggest advantage is that a foreign move has a broader category of deductible moving expenses. For a foreign move, the deduction for moving household goods and personal effects from the old residence to the new residence is expanded to include expenses for both moving those goods and effects to and from storage, and storing those goods and effects for part or all of the period during which the new place of work continues to be the taxpayer’s principal place of work. In a domestic move any storage of goods either prior to shipping to the new location or on arrival are not deductible however in a foreign move they are.
It is important to note that any expenses attributed to income that is excluded under the Foreign Earned Income Exclusion will not be able to be deducted. It is important to understand that the devil is in the details in taxation and that the situation discussed may not meet your specific tax situation. Consult us, qualified expat tax specialists, to see if you can use the extra deductions at James@aitaxadvisers.com
Many U.S. expats have IRAs. Starting in 2015 the IRS will only allow one IRA roll over per year from an IRA to an IRA. In this case a “rollover” is specifically defined as withdrawing funds from an IRA and holding them for less than 60 days then depositing them into a new IRA. While it is rare to do this more than once a year it has been used in some advanced tax and income planning to minimize borrowing cost for generally high net worth business owners. And occasionally due to unforeseen circumstances. If however a person does a transfer directly between IRA accounts and never holds the funds these transfers are unlimited.
The penalty for making more than one rollover per year is steep as the second withdrawal is treated as taxable income and a 6% excise penalty is paid on the reinvestment if it exceeds the IRA contribution limits for that year.
If you are looking at doing any type of rollovers it is best to discuss your options for tax planning with us, qualified expat investment advisers at James@aitaxadvisers.com