For high-net-worth individuals and second passport seekers, the United States remains one of the most attractive destinations for relocation. Whether through the EB-5 Immigrant Investor Program, employment-based pathways, or family reunification, many international investors aim for U.S. permanent residency. But along with opportunity comes obligation – specifically, one of the most far-reaching and complex tax systems in the world.
Understanding how income tax in the US applies to investors is not just a compliance matter; it’s a critical financial strategy. This guide outlines key concepts of U.S. taxation, including federal and state taxes, global asset reporting, and the pre-immigration planning that can save you millions.
When Do You Become a U.S. Tax Resident?
1. Green Card Test
If you hold a U.S. Green Card, you are automatically a U.S. tax resident, even if you reside outside the U.S. or spend only a few days per year within the country.
2. Substantial Presence Test
If you do not have a Green Card, you may still be considered a tax resident if you meet the 183-day rule using this weighted formula:
- All days in the current year
- 1/3 of the days in the previous year
- 1/6 of the days in the year before that
Once you meet either test, the IRS considers you a U.S. person, subject to taxation on your worldwide income.
Core Principles of U.S. Income Tax That Investors Must Know
Principle 1: Taxation on Worldwide Income
Unlike many countries, the U.S. taxes its citizens and tax residents on income earned globally. That includes:
- Dividends from foreign corporations
- Capital gains from overseas real estate
- Foreign salaries or business income
- Interest from offshore accounts
Principle 2: Federal Progressive Tax Brackets (2025)
Federal income is taxed on a marginal scale ranging from 10% to 37%, based on income level.
Principle 3: State and Local Income Tax
In addition to federal taxes, many U.S. states impose separate income taxes:
- High-tax states: California, New York, New Jersey
- No state tax states: Florida, Texas, Nevada, Washington
Where you choose to live directly impacts your effective tax rate.
Principle 4: Different Rates for Different Income Types
- Ordinary Income: Salaries, business income, short-term capital gains – taxed at regular rates
- Long-Term Capital Gains and Qualified Dividends: Taxed at preferential rates (0%, 15%, or 20%) based on your income bracket

Beyond Income Tax: Other U.S. Tax Considerations for HNWIs
Gift and Estate Tax
- U.S. citizens/residents: Lifetime exemption exceeding $13 million (as of 2024)
- Non-residents with U.S. assets: Only a $60,000 exemption before the estate tax applies
Foreign investors who own U.S. property must factor in potential estate tax exposure.
FBAR & FATCA Reporting Obligations
As a U.S. tax resident, you must report global financial assets:
- FBAR (FinCEN 114): Mandatory if foreign accounts exceed $10,000
- FATCA (Form 8938): Required for substantial foreign holdings
Penalties are severe, and failure to comply can lead to prosecution.
Pre-Immigration Tax Planning: What to Do Before You Enter the U.S. Tax System
Once you become a U.S. tax resident, your planning window closes. The following strategies should be implemented before your status changes.
1. Accelerate Foreign Income
Receive large bonuses, commissions, or capital gains before becoming a U.S. person to avoid U.S. taxation.
2. Step-Up in Basis for Global Assets
Revalue your foreign investments at fair market value (FMV) on the date you become a U.S. tax resident.
Example:
- Original purchase price of offshore property: $300,000
- FMV on immigration date: $1 million
- Post-immigration sale at $1.1 million → U.S. capital gains tax applies only to the $100,000 gain
Tip: Get formal appraisals for stocks, properties, and businesses.
3. Restructure Foreign Trusts and Companies
The U.S. imposes punitive rules on foreign-controlled trusts and corporations. Without proper planning, you may face:
- Double taxation
- Forced recognition of phantom income
- Complex annual reporting
Restructure or dissolve these entities under professional guidance before residency begins.
4. Execute Pre-Residency Gifting
Make large gifts to family members before becoming a U.S. person to avoid gift tax and protect your lifetime exemption.
Why Preparation Is the Key to the U.S. Tax Success
The U.S. tax system is built to ensure full transparency and global compliance. While the opportunities of American life are unmatched, they come with a high level of financial scrutiny and potential exposure if you’re not prepared.
Summary Checklist for Second Passport Seekers:
- Understand the tax residency triggers (Green Card / Substantial Presence)
- Confirm how worldwide income will be treated under U.S. law
- Choose a state with favorable income tax policies
- Plan gifting and asset restructuring before arrival
- Work with cross-border tax professionals
U.S. Residency Is a Tax Commitment, Not Just a Lifestyle Choice
The American Dream is alive and well, but for global investors, it requires careful navigation. Whether you’re pursuing an EB-5 visa, relocating through employment, or joining family in the U.S., the real cost of immigration isn’t just the visa – it’s the global taxation obligations that follow.
Professional pre-immigration tax planning is not optional – it’s essential. The decisions you make before your U.S. residency begins will shape your long-term financial future.
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