Ep 74: All About Immigration Status
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In this solo episode, I discuss the critical relationship between immigration status and financial planning.
I outline the various immigration statuses, including non-immigrant visas, green card holders, and naturalized citizens, emphasizing the financial implications of each.
The conversation highlights the importance of understanding these statuses to avoid costly mistakes and the necessity of consulting professionals for tailored advice.
Episode Links and Resources
Ep 67: Visa To Wealth: Brewing Success With H-1B and O-1 Visas
Ep 54: Challenges Of "Temporary Permanence" - Leaving The US On A Work Visa
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Jane Mepham, CFP (00:06)
Your planning needs to take into consideration your immigration status.
In today's episode, which is a solo episode, I'm going to quickly talk about the four different immigration statuses. Pretty much everybody has an immigration status, and it's important that you understand what that is. And truly, when you have roots and assets outside the US, your planning is way more than investment management. And a mistake here can be fatal to not only you.
But also your future generations. Before you move from one status to another, please consider the financial implications, not just the immediate ones, but also the future ones. And as we say all the time, your immigration status is not your tax residency status. Okay, so I'm going to address
The four immigration statuses
Actually, there are four immigration statuses, but we'll only address three, which is the three that we work with. Each of these statuses impacts your finances differently. Number one, non-immigrant visas. There are about 80 non-immigrant visa types divided into about 20 categories. I'm going to address a couple of the main ones.
Work Visas
The main categories are one, work visas. And we talk a lot about work visas. Work visas go all the way from H1B, TN, O1, L1, E3, all the way to H1B1 visa. The characteristics of each make a huge difference in how we apply. For example, if you're on an E3 visa, your spouse can work.
Dula-Intent Status
If you're on a TN visa, your spouse cannot work. Now, you also need to take into consideration dual intentionality of each visa, especially if you're planning on pursuing the green card. In the show note, I'm going to add a graphic that talks about what happens with
each of these visa statuses if you lose a job. And in this climate, we know this is really important.
G-4 Visa
Important and this is really key. The next category under the non-immigrant visa type is what's called the G4 visa. The G4 visa is granted to foreign nationals who come to the US to work for international organizations such as the World Bank and the IMF.
What's so key and interesting and important about the G4 visa is that a holder of a G4 visa.
Is considered a non-resident for tax purposes, but may still be required to file US taxes on other US income. As a G4 visa holder, you're exempt from paying taxes on US wages and are therefore not eligible to use what's called the substantial presence test, which is what we use to determine the number of days spent in the country.
For US income taxes. But here's the tricky thing about the G4 visa. For estate planning purposes, you could be considered to have a domicile in the US, which leads to all kinds of tax complications. So it is important to work with a professional who understands the nuances of this particular visa.
E-1/E-2 Trader / Investor Visa
Another category is what's called the E1 or the E2.
Treaty trader or investor visa. The E1 visa is granted to a foreign national who comes to the US to engage in international trade. E2 is for those coming to the US and planning on investing a certain amount of money. Now, this assumes that the US and that home country have a trade treaty agreement in place.
And by the way, these two visas do not lead to a green card. So the planning on this visa needs to take this into consideration as they are really temporarily from that point of view. So if you're thinking of wanting to move to the US or being in the US permanently, this may not be the visa for you.
Now, these treaty trader or investor visas do allow dependents to accompany the primary holder.
And more importantly, they allow the dependent, the spouse, to actually find a job which be completely unrelated to the primary visas holder job. It's such a huge planning opportunity for the spouse, as the only limit is really their ability.
Now their duration can be up to five years, but it depends on the home country's treaty with the US. And now we have the student visa, the F1 or the J1 visa.
F1/J2 Student Visas
Student visas are granted to international students and typically do not allow them to work off campus without special permission. But once they graduate, the F1 students, they can obtain what's called an OPT visa, which on which they can work.
And with the STEM OPT visa, they can work for up to three years.
Now, since the OPT is considered to be an extension of the F1 visa.
You still have to wait five years before using the substantial presence test to confirm US tax residency. If you're in this situation, it's a fantastic time to take care of and organize your overseas assets, if any, and to ensure they're not tax mines or at least get ahead of that.
Now, there's a law that's going through right now, which actually by the time this is published, may have been⁓ made into law where previously the F1 and the J1 visas, you could stay in a country for what was called DS, duration of status. So as long as you're a student, you'll be able to continue being on that visa.
But if this law goes through, your visa duration is going to be changing to four years. And so it's something we need to take into consideration when we plan.
Now on the F1 visa, like I said, you can do anything. You can invest in the country. Just be aware of that five-year rule. Okay. Now, the next category, we've just addressed the non-immigrant visa category.
Green Card Holder
The next category is the green card holder, permanent residency. The key thing with the green card, and we have an episode that goes into this, it's it's truly supposed to be permanent.
It means you've left your country and you've moved to the US and you're going to permanently reside here.
Leaving the US for extended periods without special permission can result in the revocation of the green card, yet have continued US tax obligations.
So it's I find it interesting that when people claim the difference between the green card and the US passport is that the green card holder cannot vote.
True, but there's way more than that. There are real tax implications in estate planning, including estate taxes. For example, a US citizen can give their non-US citizens' spouse, so let's say a green card holder, non-immigrant visa holder, up to 194,000 this year before gift taxes kick in.
If this passport is a US citizen, they can give each other unlimited amounts.
Per year with no tax implications. And so this is one of those when I meet people who are on the green card and they say they don't plan on taking the US citizenship.
I think it's worth a conversation to talk about the implications of moving or staying on that green card or moving to being a US citizen. Finally, I'm gonna talk about a naturalized citizen.
Naturalized US Citizen
A naturalized citizen, if you're a naturalized citizen, your technical financial planning is more or less the same as a natural born citizen. And by the way, this basically means you've been through the whole immigration process.
You've moved from a green card holder, and now you've become a US citizen. You have a US passport. Now, the differences come in the following.
One, does your home country allow dual citizenship with the US? If dual citizenship is not an option, how does the home country treat you? We've come across a lot of these cases. For example, I'll use India. India does not allow dual citizenship.
And so if ⁓ somebody born in India Is on a green card and they decide they want to become a US citizen, they have to give up their Indian citizenship. But what India does, it will allow you to have what's called an Overseas Citizen of India.
The question you need to ask yourself is, where do I plan to be permanently? And if my country doesn't allow dual citizenship, for example, what kind of assets do I have in the other country?
And if I move back.
Based on the fact that I've already given up my citizenship of the other country, what are the implications of that? What am I able to do, or what am I not able to do?
And again, of course, like I said, estate planning is really where I think we're seeing, we see a lot of issues that people tend to ignore when they think about immigration statuses.
So it's fair to say your planning will be completely different.
Based on your immigration statuses. This is just an intro.
So to summarize, we've addressed, we said there are four distinct immigration statuses, but for this episode, we've only addressed three: one, the non-immigrant visas, work visas, and all that. Two, the green card holders, and three, naturalized citizens.
So please be aware of what your status is.
Become a student of your immigration status or the visa, whatever the case may be.
And before you switch from one to another, it's really, really important that you talk to a professional. This could be an immigration lawyer, ⁓ a cross-border planner, or cross-border EA, like my friend Mana said.
And with that, we'll come to the end of this episode. Please give us a like, give us a comment. We love to see those when we come back.
For all show notes, you're gonna find everything on our website, theimcafe.com. Theimcafe.com.
By the way, Manasa tends to do this ending. So if it sounds a bit rough, you understand why. Thank you and goodbye.
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The speakers' views and opinions discussed in this episode should not be considered financial, tax, or legal advice. Consult your advisor for any legal, cross-border tax, and financial advice.