If you are preparing to move from Taiwan to the U.S. or work there long-term, the transition in status from a "Non-Tax Resident" to a "Tax Resident" is the most critical dividing line for financial and tax management. The United States operates under a "Global Taxation System"; once you become a tax resident, you must report all assets, interest, dividends, and even real estate disposals held in Taiwan to the U.S. authorities.
The following is a summary of key financial and tax planning points to address before departure:
I. Consolidation and Digitalization of Financial Accounts
Streamlining your Taiwanese accounts before leaving can effectively reduce the complexity of filing the "Foreign Bank and Financial Accounts Report" (FBAR, or "Fat Boy") and the "Foreign Account Tax Compliance Act" (FATCA, or "Fat Cat") with the IRS.
§ Close Low-Efficiency Accounts: U.S. law requires reporting if the total value of overseas accounts exceeds $10,000 (FBAR). Closing infrequently used accounts reduces the risk of missed reporting.
§ FATCA Reporting Thresholds: For those residing within the U.S., the thresholds are lower:
Ø Single or Married Filing Separately: Total assets exceeding $50,000 at year-end, or over $75,000 at any point during the year.
Ø Married Filing Jointly: Total assets exceeding $100,000 at year-end, or over $150,000 at any point during the year.
§ Overseas Residents: If you hold a Green Card but reside outside the U.S. (e.g., still working in Taiwan), the thresholds are significantly higher:
Ø Single or Married Filing Separately: Over $200,000 at year-end, or over $300,000 at any point.
Ø Married Filing Jointly: Over $400,000 at year-end, or over $600,000 at any point.
§ Asset Scope: FATCA covers a wide range, including bank deposits, securities, bonds, corporate shares, and insurance with cash value (savings insurance).
§ Nominee Accounts: If parents use your account for investment, these assets are still considered yours by the U.S.. Return or transfer these assets before becoming a tax resident to avoid U.S. disclosure or taxation.
§ Online Banking: Ensure all remaining accounts have online banking enabled to track "highest annual balance" and "year-end balance" for tax filing.
II. Disposal Strategies for Investment Tools (Stocks, Funds, Insurance)
The U.S. uses a "realization basis" for capital gains; utilizing the "Tax Vacuum Period" before your status change is vital.
§ Liquidating Profitable Assets (Step-up Basis): Taiwan does not tax capital gains on stocks, but the U.S. does. Sell profitable stocks before moving and buy them back after arriving. This increases your "cost basis," ensuring you are only taxed on appreciation that occurs after you become a U.S. resident.
§ Retain Loss-Making Assets: Assets with a book loss can be sold after becoming a tax resident to offset other capital gains in the U.S.
§ Dispose of Funds and ETFs: U.S. reporting for overseas funds (PFIC) and ETFs is extremely complex and carries high tax rates. It is recommended to liquidate all Taiwan-based funds and ETFs to avoid accounting fees that may exceed investment returns.
Ø Why is PFIC reporting complex? Each fund requires a separate Form 8621. Without a special "Election," gains are taxed as ordinary income at the highest rate, plus compounded interest as a penalty (Excess Distribution). You also lose the benefit of long-term capital gains tax rates.
§ Switching Investments: After moving, consider buying U.S.-issued ETFs (e.g., VOO, QQQ) via a U.S. brokerage, which are tax-efficient for residents.
§ Insurance: For policies with cash value, prepare a "Cash Surrender Value Table" for reporting. Evaluate whether to cancel complex savings insurance before departure.
III. Real Estate: Self-Occupation, Rental, and Record Keeping
Because real estate involve large sums, keep all vouchers for future cost deductions.
§ Self-Occupied Property: If selling, it is best to do so while qualifying for Taiwan's self-use tax incentives. After becoming a U.S. resident, there is a tax-free allowance ($250,000 for singles / $500,000 for couples), but the calculation differs from Taiwan.
§ Rental Property: The U.S. allows deduction of actual expenses (repairs, property taxes, etc.), unlike Taiwan's fixed 43% deduction. Keep all receipts.
§ Cost Documentation: Retain purchase contracts, deed tax receipts, and receipts for "major renovations" to reduce future taxable gains.
IV. Family Business Shares
Ownership in a family business is a highly sensitive area under U.S. tax law.
§ Over 10% Ownership: Requires disclosure of the shareholder list, organizational chart, and financial statements (balance sheet and income statement).
§ Over 50% Ownership (CFC): Even if the company does not distribute dividends, shareholders may still be taxed on the company's earnings based on their shareholding ratio.
§ Recommendation: If you wish to keep family business finances private, conduct equity restructuring before moving to the U.S.
V. Retirement Funds
§ Labor Pensions: It is recommended to settle and claim a lump-sum payment before emigrating. If claimed after becoming a U.S. tax resident, the amount will be taxed as annual income, potentially pushing you into a much higher tax bracket.
