How to work abroad with a digital nomad visa
Many countries around the world now offer digital nomad visas that allow employees to work remotely from anywhere. According to travel experts at NerdWaller, a digital nomad visa is essentially a temporary residence permit for remote workers.
Unbranded – Lifestyle
Americans are renouncing their citizenship in droves, but Uncle Sam may still be lurking.
After nearly 20 years, the U.S. Treasury last year finalized a rule that says certain individuals who give gifts to existing U.S. taxpayers by relinquishing their citizenship or green card will generate a tax bill for the recipient. Amounts in excess of the $19,000 annual gift exclusion are generally taxed at the highest estate or gift tax rate (currently 40%). Deductions from foreign taxes paid, such as inheritance tax if the donor dies, may reduce the amount owed.
Unlike regular gift tax rules that impose a tax on the donor, this special tax, known as the Section 2801 tax, is imposed on the recipient of the gift unless the recipient is a spouse or a specified charity that qualifies for some other deduction.
“This is shocking because Americans who inherit an estate will pay U.S. inheritance tax on foreign real estate, even if all the assets are foreign in nature,” said Richard Pong, a certified public accountant in San Francisco.
How do taxes work?
Whether tax is due depends on what type of expatriate the donor is.
Eligible overseas employees You renounced your U.S. citizenship or green card on or after June 16, 2008, and are one of the following:
- The average annual net income tax for the five tax years ending before the date of deportation was more than $206,000.
- Had a net worth of at least $2 million at the date of emigration.
- Failed to demonstrate compliance with all federal tax obligations for the five tax years prior to the date of expatriation on Expatriate Form 8854.
Overseas expatriates who are not eligible All those who have renounced their American citizenship or green cards.
According to the IRS, the Section 2801 tax applies only to U.S. citizens, residents, domestic trusts, and foreign trusts that elect to be treated as domestic trusts that receive gifts from eligible expatriates.
How do taxpayers report gifts and calculate taxes?
Taxpayers should follow these instructions to file IRS Form 708. Typically, forms and taxes are due 18 months after the end of the year in which the taxpayer receives the gift.
The final regulations will apply to gifts received after January 1, 2025, according to professional services firm KPMG.
However, “this format is retrospective,” Pong said. “The tax form hasn’t existed for 17 years, but this form applies to transfers after June 17, 2008. And yes, you can collect back to 2008.”
Cardinal Point, a cross-border asset management firm with offices in the United States and Canada, warned in a blog post that “the absence of actual documentation does not exempt taxpayers from liability.”
How many Americans have renounced their American citizenship?
The number of annual departures soared to a record high of 6,705 in 2020, and the number has remained high ever since, according to immigration services firm Boundless. By comparison, before 2009, the average number of cases was only 200 to 400.
According to Banbridge Accounting Firm New York, which specializes in foreign taxes, 4,819 Americans renounced their citizenship in 2024. This is a 48% increase from 3,260 cases in 2023.
Mr Banbridge said there had been an “influx of 2,123 overseas migrants” in the three months leading up to the November 2024 presidential election, the highest number in four-and-a-half years.
Medora Lee is USA TODAY’s money, markets and personal finance reporter. Please contact us at mjlee@usatoday.com. Subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
