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Navigating Your Return to the US Thumbnail

Navigating Your Return to the US

Sarah Pezzino CFP® EA

Becoming an expatriate comes with a learning curve of its own. It often takes years to fully feel settled and navigate life as a US taxpayer abroad. But what happens when that experience is reversed? Repatriation can introduce a new set of financial considerations, many that are overlooked until the transition begins.

 Taxes and Reporting Obligations

While many assume moving back to the US will make taxes easier, this is not necessarily true. You may have accumulated new accounts while abroad or maybe even property. Moving back does not eliminate the need to report “worldwide income.” What changes is how the income is taxed and what deductions or credits are still available. 

Foreign Earned Income Exclusion (FEIE): This exclusion is only available if you meet either the physical presence test or the bona fide residence test. This eligibility often ends mid-year in the year you move.

Foreign Housing Exclusion (FHE): This exclusion is only available if you are eligible for the FEIE.

Foreign Tax Credit (FTC): This credit is only available if you have foreign-source income and paid foreign tax.

Due Dates: Your tax return deadline will no longer be extended to June 15. You will need to file and pay by April 15 unless you elect an extension making your tax return due date October 15 (not December 15).

It is also critical to evaluate the timing in which you receive bonuses and/or vest in equity compensation before moving to eliminate higher than expected tax bills.

Retirement Planning Considerations

Relocating back to the US can also impact retirement planning. There will likely be more opportunities to contribute to your retirement, but your new tax rate could discourage other planning strategies that might have previously made sense.

  • Roth Conversions: While abroad, you may have experienced lower tax-rates as well as the absence of state tax that you might have been subject to before moving. Upon moving, the cost to convert may be much higher.
  • Foreign retirement plans: You may face higher tax rates by the foreign country, especially if you want to access this money sooner than retirement age.
  • Retirement savings: Returning to work in the US also means you may be eligible for retirement plans such as a Roth/Traditional 401k or pensions that were not available to you while you were abroad. More opportunities to save on tax-deferred accounts could arise.
  • Social Security: If you begin working in the US again, you may be able to add Social Security credits to your record and increase your estimated future benefits.

A thoughtful planning review is essential for anyone considering a move back to the US.

Legal, Practical, and Emotional Impacts of Repatriation

Tax and investments often are top of mind when moving back to the US, but the following are some underrated areas to consider. 

Estate Planning Review: The documents you created while living abroad may no longer be appropriate. It’s important to reevaluate appointed individuals such as guardians, healthcare proxies, trustees, and powers of attorney. Additionally, you want to understand how state-specific estate laws would apply to you.

Administrative: Due to extended time outside the US, your credit history may be limited or outdated, which can lead to complications in mortgage approvals. Updating your address on your US-based accounts will be essential, as will informing your foreign accounts of your US address. If you’re returning to the US with a driver’s license that is expired, you might even need to retake the driver’s license test (depending on state rules). 

Emotional: Recognizing there will be an adjustment period due to reverse culture shock upon return is important to keep in mind when making decisions. Familiar places may feel different, and you may need to rebuild your social and professional networks. Making long-term decisions about your life may be better suited once you’re settled.

Health Insurance: Health insurance coverage should be secured before or immediately upon returning to the US. Individuals who are returning with employer-sponsored coverage may experience a smoother transition. Returning to the US qualifies as a special enrollment event for state marketplace healthcare plans outside of open enrollment periods, for those without other options. 

Moving Costs: Relocating back to the US can involve significant expenses. Shipping your belongings back from Singapore, for example, could cost as much as $40,000+ for a 40-foot container according to MoversSBS. Air freight can be faster, but more costly, averaging around $4-$13 per kg. to ship essentials. One-way airfare from Singapore to the US could run around $600-2,000 per person (non-business class). If you’re looking for a longer-term rental, you can expect to pay the first month’s rent and a security deposit of one month’s rent. You may also require the assistance of a real estate agent whose fee is often equivalent to one month of rent. If you are moving back without furniture, you may find websites like Furnished Finder and Airbnb to be helpful for short- to mid-term stays until you can look for a more permanent home. If you require a car, you may consider using websites like Turo (the Airbnb of car rentals); just be sure to pay the extra for insurance offered. Many cities also have carsharing services, which might meet your needs if you do not need a car consistently.  

Repatriating to the US marks a significant transition, both personally and financially. While many aspects of life may feel familiar again, the financial landscape often looks different. A financial plan that accounts for both international history and US-based goals can help you navigate in the best way possible; reach out to one of our Avrio wealth planners to start the discussion.


Sources:

https://sg.sirelo.org

https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion

https://brighttax.com/blog/tax-considerations-american-citizens-moving-back-to-the-us/


This material is intended for educational and informational purposes only. It is not intended to provide specific advice or recommendations for any individual. Additionally, you should consult with your Financial Advisor, Tax Advisor, or Attorney on your specific situation. The views expressed in the material are that of the author and do not necessarily reflect those of any market, regulatory body, State or Federal Agency, or Association. All efforts have been made to report or share true and accurate information. However, the information may become materially outdated or otherwise rendered incorrect due to subsequent new research or other changes, without notice. The author nor the firm are able to always verify the content from third-party sources. For additional information about the firm, please visit the MAS Website at https://www.mas.gov.sg/  and the SEC Website at www.adviserinfo.sec.gov. For a copy of the firm's ADV Part 2 Brochure, please contact us at info@avriowealth.com.