Are you U.S. citizen or resident? Have you ever just wanted to leave the whole U.S. federal tax system behind? Well, you can . . . try at least. But there’s a cost.
U.S. citizens and residents are subject to federal income tax on their worldwide income.1 They’re subject to federal estate tax based on all assets wherever located upon death.2 And, they’re subject to gift tax on the transfer of all property, whether it be real or personal, tangible or intangible.3
Noncitizens-nonresidents, on the other hand, are subject to federal income tax only on certain U.S. source income and income that’s effectively connected with the conduct of a U.S. trade or business.4 They’re subject to federal estate tax only with regards to assets situated within the United States upon death.5 And, they’re generally subject to gift tax only when the gift is real estate or tangible personal property located in the United States at the time of the gift.6