Thus, you may wonder why someone who lives in the U.S. as a legal permanent resident for 5 years or more, and intends to continue residing in this country, would not apply for U.S. citizenship.
One of the concerns raised by our clients is that U.S. tax treatment is harsher to a U.S. citizen than to a U.S. permanent resident. Nonetheless, tax specialist Gil Allouche, confirmed to me that there are no income tax treatment difference between a green card holder and a U.S. citizen who lives in the U.S. For instance, both need to pay taxes on their U.S. income; both need to declare and sometimes pay taxes over their worldwide income; both need to file foreign bank account reports when required; and both are subject to the same deductions and benefits. In fact, any person living in the U.S. over 183 days of the year is considered a resident for tax purposes and is subject to the same income tax laws regardless of their status, with a few exceptions provided by tax regulations.
One disadvantage Mr. Allouche pointed out is for a U.S. citizen who does not intend to live in the U.S. In such case, he/she will be imposed an exit tax when giving up his/her citizenship. In the case of a green card holder, he/she just needs to return his/her green card and has no exit tax to pay when moving abroad.
In the case of U.S. citizens or U.S. residents living abroad, both must declare and sometimes pay worldwide income.
In terms of estate planning, being a U.S. citizen is beneficial, as unlimited marital deduction is only allowed between U.S. citizen couples.
Thus,if taxation treatment is the reason why you are delaying your naturalization application, please know that if you intent to stay in the U.S., your income tax responsibilities will be the same whether you are a U.S. citizen or a U.S. resident.
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