- 1 Pros and Cons of Having a Green Card
- 2 The Pros of Having a Green Card
- 3 Easier Travel to the United States
- 4 Can Lead to US Citizenship
- 5 After Citizenship can Sponsor Other Family Members
- 6 The Cons of Having a Green Card
- 7 Worldwide Income Tax and Reporting
- 8 US Tax Follows You Abroad
- 9 US Exit Tax Implications
- 10 International Tax & Legal Specialist Team
Pros and Cons of Having a Green Card
When a person is considered a non-US citizen, there are two ways they can still be considered a resident of the United States and therefore required to pay tax on their worldwide income and disclose their foreign assets to the US government. The taxpayer would either meet the Substantial Presence Test –– which is more of a temporary resident scenario – or else the taxpayer may obtain lawful permanent resident status and be issued a green card — which as the name connotes, is a more permanent resident status. While there are benefits to having a green card, such as being able to travel more freely to the United States and not having to apply for new visas — or worry about overstaying the visa that was issued — there are disadvantages as well. The biggest disadvantage is that the Taxpayer is subject to United States tax on their worldwide income. Let’s go through some of the advantages and disadvantages of having a green card.
The Pros of Having a Green Card
Let’s start on a positive note, with the advantages of having a Green Card —
Easier Travel to the United States
Once a person is considered a green card holder, they are able to freely travel to and from the United States without having to obtain a visa each time they want to travel to the United States. In addition, there is no limitation on the length of stay as there are with other types of visas, such as the B1/B2 tourist visa which limits travel to less than six months in any year.
Can Lead to US Citizenship
If a person wants to become a US citizen, they would usually first obtain a green card and take the time to meet the necessary requirements — then they can then apply to become a US Citizen. And for many permanent residents, becoming a US Citizen is the ultimate goal they seek are seeking to accomplish.
After Citizenship can Sponsor Other Family Members
If a person has the American dream of becoming a US citizen, then once they meet the Green Card holder requirements and become a US citizen — then they’re able to sponsor other family members o bring them over to the United States to become US Citizens as well. For those seeking this path, having a green card is the first step in the process (most of the time).
The Cons of Having a Green Card
While there are many benefits to having a green card, there are some disadvantages as well —
Worldwide Income Tax and Reporting
Unlike nearly every other country in the world, the United States taxes individuals who are considered Green Card Holders on their worldwide income. In addition, they are required to disclose their foreign assets, accounts, and investments and various international information reporting forms such as FBAR and FATCA. The failure of a person to meet these requirements may result in significant fines and penalties and tax preparation will almost definitely become a burden when a person has a global portfolio.
US Tax Follows You Abroad
Once a person has a green card, they are required to reside in the United States for a significant amount of time each year. When a person fails to meet those requirements –– presuming that they did not apply for a reentry permit –– then they are no longer able to travel to the United States and they may have their green card revoked at the port of entry. This does not mean the person escapes an ongoing US tax liability just because their Green Card was revoked. Therefore it is very important for Green Card Holders who may not intend on residing in the United States for a significant amount of time each year to understand the different rules and requirements before obtaining the Green Card..
US Exit Tax Implications
If a person is considered a long-term lawful permanent resident, it usually means they have been a Green Card Holder for eight of the last 15 years—presuming they did not make any treaty election to be treated as a foreign resident — and become subject to the covered expatriate analysis and potential exit tax. Depending on the net worth of the Taxpayer, this may result in a significant exit tax so it is something taxpayers should consider either before obtaining the green card — and definitely before reaching the eight-year mark.
International Tax & Legal Specialist Team
Golding & Golding specializes exclusively in international tax, including exit tax and expatriation.
Contact our firm today for assistance with getting compliant.