I am not a US citizen, although I currently live and work in the US. I am planning to leave the US permanently in the near future.
I currently have investments with US brokerages, but they seem to require an US address to work.
Once I move away, how can I keep investing in the US stock market? I read that interactive brokers offer funds for total US stock market, but I am wondering if I will still have to file and/or pay taxes to the US in that case, which I would really like to avoid.
Interactive Brokers is the only brokerage that will allow you to use a foreign address as your primary address and still invest in US markets.
I currently use them as a US expat.
Most people I know use a mailbox or parents or friends address in the States and claim it but technically if you were found out you could be forced to liquidate your account.
Now will they find out? Highly unlikely. But regardless Im more interested in always being 100% above board with my life savings.
Use mailbox service and VPN, although you’ll likely get found out at some point. Yes, if the brokerage thinks you’re in the US, your profits or losses will be reported to the IRS every year. Then you’ll be dealing with various taxation issues.
As long as it works, just file IRS taxes on profits.
You are moving to Ireland? EU PRIIP rules will limit your ability to hold US-domiciled ETFs. If you are not a US citizen / greencard holder, then after you move you can hold IE/EU-domiciled ETFs whose underlying holdings are in the US, e.g., Vanguard VUAA. You do not want to hold VUAA while still a resident alien in US, due to PFIC taxation.
So you’re saying once I leave the US I can buy Ireland-domiciled ETFs like VUAA via Interactive Brokers or Schwab International, and I won’t have to deal with US taxes?
I do have most of my assets in Schwab right now. They did mention something about an international account, but could not tell me whether I will pay taxes to the US on gains from US domiciled ETFs. Is this the case?
I used Greenback tax services. But haven’t filed my taxes for the last 2 years… I got really tired of paying hundreds of dollars to let the US know I don’t owe them anything. But I do highly recommend Greenback, they were extremely helpful.
Yes, and you might as well use an Irish brokerage; there’s no benefit to using IBKR if you won’t be holding US-domiciled ETFs.
As an NRA without US-source income, you won’t need to file with IRS, but you will be implicitly paying 15% tax on US-source dividends, via a withholding that Vanguard IE pays, which manifests as a slight drag on the return of the IE-domiciled fund.
I am not moving to Ireland. Perhaps another EU country, or Switzerland, or outside EU. Weighing my options right now.
In any case I imagine I will be paying taxes on cap gains and dividends in my new country of residence. If I also pay 15% to the US by default this looks like double taxation to me. Not sure if US stock market is still a good choice in this case.
If this just affects dividends and not cap gains tho there must be some tax optimized fund which holds no dividend paying stocks, right?
EU vs non-EU makes a difference. Yes, the withholding is only on dividends; gains are sourced to your tax home. Yes, there are accumulation-focused ETFs vs dividend-focused ETFs. It also depends on the exact structure of the fund, and whether it’s a “fund of funds” (e.g., EU-domiciled ETF holding US-domiciled ETF holding US stocks).
With the right fund structure, your brokerage can issue you a slip showing foreign tax paid, which you can then apply to FTC with your country of residence. FTC only works if that income is taxed by your country of residence, e.g., not in a retirement/pension account.