US - NZ tax status

debkiwi · Posted: Mon Jun 14, 2004 3:20 pm Post subject: US - NZ tax status

We moved to NZ 18 months ago from the USA. I'm a Kiwi (US green card holder for 10+ years) and my husband is American. My Green card expired 5 months before we left the US - I spent a day at Newark INS trying to renew it but after 6 hours on line waiting for an appointment, gave up.

I found out a few months ago that because I did not take any action to give up my Green Card status within 12 months of leaving the US, I have to file US taxes for the next 10 years. NOTE TO ANYONE WITH AN NZ SPOUSE RETURNING TO NZ ... LOOK INTO THIS.

The move was a lifestyle decision, made easier by NZ's capital gains and estate tax treatment ... the lifestyle is seriously threatened by the time we are now spending trying to understand the tax/trust situations in both countries, to say nothing of the cost of "professionals" to research, advise etc on the situation. Has anyone in the same circumstances had any luck ending their obligaiton to file US taxes? If so how? Any recommendations for well above average US/NZ tax accountants and or lawyers would also be appreciated.

Debbie

Raeven · Posted: Mon Jun 14, 2004 5:47 pm Post subject:

Hi, debkiwi,

This is not an answer to your question, but I'm posting to tell you I feel your pain. I am married to a NZ man who wishes for us to live in NZ, and in preparation for the move I have tried to find out all I can about the potential tax implications for us. There is little to no information available out there by qualified professionals. They either know about the US, or they know about NZ, but no one really seems to know how one thing interacts with the other!

I did learn through another friend who migrated to England from the US that I will have to file taxes in the US so long as I am a citizen (which I intend to remain being), but that I only pay tax on income I earn from the US or working for a US company in NZ (not a likely scenario). I still have questions about taxation as it relates to collection of pension funds when the time comes -- but I have time to research that, I guess!! I was actually surprised to learn that the US and NZ do NOT have a reciprocal agreement with respect to social security funds, as they each do with other nations. Sad.

Anyway, hope you get an answer to your question, and I'll be watching this thread with interest.

All the best, Rae

LovingKiwiland · Posted: Fri Jun 18, 2004 9:49 am Post subject:

IRS Publication 54 summarizes tax obligations of US Citizens or greencard holders living abroad. NZ is listed in this document as a country with which the US has a tax treaty, so this publication would apply to both of your situations.

The link is http://www.irs.gov/publications/p54/index.html

I would highly recommend looking through the whole thing as there is a lot of info, but here are a couple of excerpts you may be interested in:

If you are a U.S. citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. However, you may qualify to exclude from income up to $80,000 of your foreign earnings. In addition, you can exclude or deduct certain foreign housing amounts....

Instead of taking the foreign tax credit, you can deduct foreign income taxes as an itemized deduction on Schedule A (Form 1040).
You can deduct only foreign income taxes paid on income that is subject to U.S. tax. You cannot deduct foreign taxes paid on earnings you exclude from tax under any of the following.
Foreign earned income exclusion.
Foreign housing exclusion.
Possession exclusion.
Extraterritorial income exclusion

Hope this helps!!

Raeven · Posted: Fri Jun 18, 2004 3:50 pm Post subject:

Hi, LovingKiwiland,

Great to see you back and posting! And yes, this is just the stuff!! I thank you very much, and I'm sure others from the U. S. will thank you, too.

On my way now over to the IRS website to see how far I will be bending over...

Thanks again!

All the best, Rae