Congressional reformers passed a new set of tax provisions just before America plunged off the so-called fiscal cliff in early 2013. As a result, many high-wage earners found themselves overwhelmed by relatively large tax hikes. Especially affected were many U.S. businesses, whose owners now find themselves financially strapped. These tax law changes have led many Dallas residents to ponder whether they would be better served to move their ventures outside of the country.
People who choose to move their assets abroad should be aware that they will be required to pay an “exit tax,” a fee required before a business can be transferred wholly to another country. The exit tax should not be ignored when considering an international move. Experts say that a high-income couple with a $100 million business and $50 million in gains could find themselves responsible for as much as $10 million in tax liability if they leave in 2013.
This may be a reasonable strategy for some; new tax laws have increased rates from 35 percent to 39.6 percent for every penny earned over $400,000 for single filers. Combined with higher state taxes, our nation’s highest earners are facing drastic tax increases that could raise their capital gains withholdings to nearly 24 percent.
If you decide to leave the U.S. for greener pastures, you will be required to pay taxes on the values of assets like homes and stocks. That rule is applicable for anyone with a net worth more than $2 million or income taxes exceeding $155,000 for the past five years. As a result, expatriates are urged to leave the country before their assets appreciate.
Additionally, you will be required to pay a form of estate tax if you leave a significant amount of money to your stateside children or other relatives.
In all, the costs of relocating your business to another country because of taxes could be astronomical. Every case is different, though, so experts urge a thorough financial and legal analysis before attempting such a massive change.
Source: Yahoo! Finance, “Cost of dropping citizenship keeps U.S. earners from exit,” Margaret Collins, Feb. 22, 2013.