Author Topic: Financial implications of dual citizenship?  (Read 9037 times)

impaire

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Financial implications of dual citizenship?
« on: October 30, 2013, 09:56:17 AM »
Hi everyone,

So, here we are... I've just become eligible for US citizenship, which would give me a dual French/US nationality (dual citizenship is recognized by France for now, but not by the US). I'm tempted to apply for various reasons, but I'm not sure I understand the financial consequences fully, and this is complicated by the fact that my husband and I have not decided where we'd like to retire yet (which may well be in a third country).

1) Tax-wise: I don't anticipate the two countries to stop their tax agreements any time soon, so not too worried about that, but don't completely understand how the foreign tax credit works in the US. For obvious reasons, I've elected to pay taxes in the US rather than in France since I moved here.

2) "Entitlement"-wise: I have about five years of contributing to retirement in France (general + cadres), and I've been on W2 in the US for most of 5 of my years here, and have worked as a free-lance for two. I don't qualify for a 401k in my current situation, but savings to the max in a rollover IRA.

Anyone in a comparable situation? Any thoughts or advice? Thanks!!

dadof4

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Re: Financial implications of dual citizenship?
« Reply #1 on: October 30, 2013, 10:44:56 AM »
Another dual citizenship holder here.

Unless you have income or assets back in your home country, this should be a complete non-issue. There's really no harm in keeping both citizenships though. It is a little hedge in case something goes terribly wrong on this side of the Atlantic.

Spudd

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Re: Financial implications of dual citizenship?
« Reply #2 on: October 30, 2013, 10:57:51 AM »
I believe one implication is that if you move to France later, you will still need to file US taxes every year. They require their citizens to file taxes on their worldwide income (but I don't think you have to pay unless you're over some threshold).

SoftwareGoddess

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Re: Financial implications of dual citizenship?
« Reply #3 on: October 30, 2013, 11:31:54 AM »
I believe one implication is that if you move to France later, you will still need to file US taxes every year. They require their citizens to file taxes on their worldwide income (but I don't think you have to pay unless you're over some threshold).

This.

And if the future you is residing outside the US and your tax situation is the least bit complicated (for example, investments held outside the US), be prepared to hire a tax accountant who knows how to properly file a US return with those investments correctly represented.

Paul der Krake

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Re: Financial implications of dual citizenship?
« Reply #4 on: October 30, 2013, 02:09:12 PM »
If your husband is a US citizen, you'd have to file with the IRS regardless should you decide to live elsewhere. I can't find the exact dollar amount above which you are obligated to pay taxes to Uncle Sam, but if I recall correctly it was around 90k, well above what most mustachians would consider a comfortable retirement income.

I would check with the French authorities whether you can get some of the money you contributed to over there, and then use that as pocket change when you visit.

Something you might want to consider is that some people in the French government have suggested taxing their expats in the past. Whether they will actually go through with it is anyone's guess.

impaire

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Re: Financial implications of dual citizenship?
« Reply #5 on: October 30, 2013, 04:28:54 PM »
Thanks everyone. This pretty much confirms what I thought.

@Paul, yes, there have been some interesting noises coming from French politicians in the past few years, both in terms of expat taxation and dual citizenship recognition--one of the reasons I am considering moving forward with citizenship asap is as an insurance policy against sudden policy changes, however unlikely they seem to be at present. When the pendulum swings back next election, you never know who or what might happen...

impaire

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Re: Financial implications of dual citizenship?
« Reply #6 on: October 30, 2013, 06:58:13 PM »
Can't help you with the citizenship issue, but if you are freelancing, you can open a solo 401k.

I'm not any more (graduate student on stipend), but my husband is... Maybe we should look into that.

Siamond

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Re: Financial implications of dual citizenship?
« Reply #7 on: October 30, 2013, 07:29:50 PM »
Bonjour!

Well, I am in a fairly similar situation, except that I am a tad older (just a tiny bit!) and spent 15 years in the US after working for a while in France. My wife and kids recently got their dual citizenship, and I am the "irreductible gaulois" - although more procrastinating than refusing to jump in.

Yes, I don't expect that the US/France agreement will disappear, but to be brutally honest, your few years of work in France are probably not worth very much. I know I am NOT betting on corresponding retirement money, just viewing it as optional tiny bit of icing on the cake.  As to France possibly trying to tax me from overseas, well, they can try...

Tax-wise, I don't see much difference either way.

Pains me a bit to say so, but the potential for you to have an interesting career, to save solid money and to retire early and flexibly is much greater in the US. Also, if you want to have an experience in another country for a few years, the citizenship guarantees that you will be able to come back to the US if you wish to, which is not the case with a green card. An important backup option, if you ask me.

Overall, I'd advise that you take the plunge. No harm, and more flexibility down the road.

PS. as side note, I live pretty close to you (near Boston). If you want to come and chat 'live', feel free to contact me.

TorontoDeveloper

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Re: Financial implications of dual citizenship?
« Reply #8 on: October 30, 2013, 08:53:54 PM »
I believe one implication is that if you move to France later, you will still need to file US taxes every year. They require their citizens to file taxes on their worldwide income (but I don't think you have to pay unless you're over some threshold).

This.

And if the future you is residing outside the US and your tax situation is the least bit complicated (for example, investments held outside the US), be prepared to hire a tax accountant who knows how to properly file a US return with those investments correctly represented.

It's a bit of a nightmare to try to go figure out the taxes on your own. I live in Canada which has pretty extensive tax treaties with the US, but I still can't invest in index funds without filling out dozens of pages of complex forms that weren't designed for expats to end up owing $0 tax. I have been seriously considering renouncing my US citizenship.

If you're going to be living in the US, it obviously comes with some benefits. If you plan to leave the US and never return, I highly doubt it would be worth it.

impaire

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Re: Financial implications of dual citizenship?
« Reply #9 on: October 30, 2013, 09:05:45 PM »
Yes, I don't expect that the US/France agreement will disappear, but to be brutally honest, your few years of work in France are probably not worth very much. I know I am NOT betting on corresponding retirement money, just viewing it as optional tiny bit of icing on the cake.
Ah! I agree, I count on this being absolutely worthless. Actually I'm going to check if I can get some of that money back and plug it into my IRA or something, but I'm not holding my breath :p

Pains me a bit to say so, but the potential for you to have an interesting career, to save solid money and to retire early and flexibly is much greater in the US.
Agree on all counts, though of course that's not the only consideration in terms of where to retire... My most-likely scenario is the US, though.

PS. as side note, I live pretty close to you (near Boston). If you want to come and chat 'live', feel free to contact me.
Nice! Thank you so much for the offer. I may just contact you.

@TorontoDeveloper, thanks for the info. I think the most likely outcome is staying in the US--so I am going to plan for it...