TheresaIT
1/3/2017 21:13 EST
Is anyone who is a dual citizen collecting social security? If so, are you paying taxes on your ss in Italy, the US or both?
I've searched the forum for answers and the latest info I found was from 2015 - as things change, curious to know the current status as I'm thinking of applying for SS this year.
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maluza86
1/4/2017 03:24 EST
My wife is a dual national and collects SS Disability. Due to the Tax Treaty it is not taxed in the US but is in Italy.
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DoppioCittadino
1/4/2017 08:30 EST
Teresa,
Yes, your social security payments are fully taxable as income in Italy, as well as any non-government pensions, tax-deferred 401k / IRA distributions, and interest/dividend income.
On the upside, although all of these are *also* taxable to the US, you receive full credit for taxes paid to Italy and thus (for the vast majority of us) owe no additional income tax with your US return (which you must continue to file so long as you are a US citizen, regardless of where you live).
You can estimate your Italian income tax by adding up your anticipated income, converting it to euros, subtracting €8,000 from the total (was €7,500 but increases to €8,000 for 2017), and then applying the formula shown in the "Table for calculating Irpef" on this page: http://www1.agenziaentrate.gov.it/english/italian_taxation/income_tax.htm#Irpef: rates and allowances
There are some other taxes that you will have to pay depending on where you live in Italy (city/regional taxes) and also a wealth tax on foreign-based assets (money in US bank accounts, property owned in the US, etc.). Generally speaking, these taxes do not add up to much unless you are quite wealthy, in which case you probably wouldn't mind anyway.
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DoppioCittadino
1/4/2017 15:26 EST
"Just curious, what is 'quite wealthy'?"
Lol. It was just a way of saying that if you are worth several million dollars, you may not mind handing over $10 or $20,000 in taxes.
I think the actual numbers are 0.2% of financial assets and 0.76% of real estate assets not held in Italy. But, don't quote me.
It is my understanding that the "financial assets" tax does not apply to funds held in a 401k or IRA account, but does apply to savings / checking / other investment accounts.
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whidden39
From: NULL
1/5/2017 09:24 EST
I'd like to believe that the wealth tax can't touch funds residing in a 401K or IRA. Is this true?
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DoppioCittadino
1/5/2017 09:30 EST
whidden39,
I had a telephone consultation with a highly recommended Italian accountant just the other day.
He confirmed what I already believed to be true - 401k/IRA money is not subject to the wealth tax.
Frankly, I am not sure why, as said money consists of funds which are outside Italy - just as, for example, funds in a checking, savings or money market account (which are subject to the tax).
But, hey, no need to look a gift horse in the mouth...
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LisaC1
1/5/2017 09:58 EST
Hi Doppio,
This is a surprise to me as well. Could you send me the name and contact info of the accountant? Are you now in Italy? Just trying to get our ducks in a row before the move.
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DoppioCittadino
1/5/2017 10:29 EST
Lisa,
I think the reason is a combination of a) they are "retirement funds" and treated similarly to pensions and b) you could not "move" the money to Italy even if you wanted to without paying potentially huge penalties.
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LisaC1
1/5/2017 10:53 EST
That is good news, Doppio, thank you! In the meantime, when you have a chance, could you shoot me a pm with the accountant's contact details? We will definitely need one in Italy who is familiar with the tax treaty. In addition, we are in the market for one to do our US taxes as our accountant is retiring. We currently live in VT but it does not matter where the accountant is. The one we use now is based in NJ as he took over my father's practice when he retired.
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DoppioCittadino
1/5/2017 11:08 EST
I did the PM thing about 30 minutes ago.
In the past, I have also spoken with Tina Salandra from http://www.numericalcpa.com/
She routinely works out of both Rome and New York City. I *think* she focuses primarily on US taxes for expats; not certain if she also prepares Italian tax returns.
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LisaC1
1/5/2017 11:17 EST
Doppio,
Thanks so much for both names, The private message just arrived. It is greatly appreciated. My consulate did not have the names of anyone for us.
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nick0126
1/5/2017 11:26 EST
interesting point of note on SS and dual nationals is that the law, whatever it actually is or dissolves to in a specific case, applies to ALL dual nationals, regardless of where they live. That means over 6 million "Italians" living in the US, that "took" their dual citizenship would need to comply. Hardly a realistic scenario. Italian law also provides for taxing PROPERTY held outside Italy, real estate included. Just because a law exist, doesn't mean it is enforceable and/or lawful. I maintain the bulk of our personal wealth in a trust for our children that I control. Neither the Italian or US governments, as well as personal attachments can touch those assets.
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LisaC1
1/5/2017 11:30 EST
Nick,
I do not think that the tax scenario you are describing applies unless you are a "tax resident" in Italy, meaning that you live 183 days per year in Italy.
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DoppioCittadino
1/5/2017 11:50 EST
nick,
Not quite correct (if I understood your intent correctly).
The US taxes its citizens on worldwide income, regardless of where they legally reside and where that income originated.
Italy also taxes its citizens on worldwide income but with three important caveats:
1. If you are "tax resident" - that is, in Italy for at least 183 days of the year - then your worldwide income for the entire year is taxable.
2. If you are not "tax resident" - that is, in Italy for less than 183 days of the year - then your worldwide income *earned during the period you were actually resident in Italy* is taxable. The income earned while you were not resident in Italy is not taxable.
3. If you were not *resident* in Italy at all during the course of the year, then nothing is taxable.
As noted already, this last one is where the US screws her citizens; the US taxes your worldwide income regardless of where you live or earn that income. Thankfully, they do give you a credit for taxes paid to foreign governments, but still...
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lifelover
1/5/2017 11:53 EST
I was just going to ask that question: by putting US real estate into a trust, before moving to Italy, does that shield from wealth tax?
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DoppioCittadino
1/5/2017 11:54 EST
Having said all that, can you imagine what would happen if, having acquired all of these tens or hundreds of thousands of dual citizens, Italy were to suddenly decide to take the US stance on taxing worldwide income regardless of where you live?
I can see a mad rush to Italian consulates to formally renounce the citizenship that people worked so hard to obtain just a few years earlier.
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maluza86
1/5/2017 12:04 EST
But as a US citizen you also get a pretty sizable tax exemption on Earned Income while residing outside the US...approx $103K, plus up to 50K exemption for housing. The caveat is it has to be Earned Income, not pensions, SS, etc.
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islandblues
1/5/2017 12:26 EST
i am curious about this asap myassests are i a trust as well but my commercialista in firenze says they an he taxed unless it's an IRREVOCABLE trust keanu g i have no control of it or its assets. let me know more!
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nick0126
1/5/2017 13:41 EST
well you're really getting into the weeds now. Of course, an irrevocable trust would indeed meet the most stringent test, as the assets are not "yours" any longer, even though you control and manage them. But, even an irrevocable trust gives the trustee tremendous power and control. Selling assets, extracting fees for management, hiring third parties as agents, etc.
But if you happen to align some assets into this irrevocable trust that happen to be revocable (i.e. it is not the trust itself that is irrevocable, but how the assets are "given",) these are every private matters and even the IRS cares not the precise structure until you die. Unless you are planning to have coffee with the finance minister and tell him you happen to be the trustee of a trust in the US, not sure how Italy would even know about it?
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nick0126
1/7/2017 09:12 EST
A note on Social Security direct deposits to non-US banks. It took me a while to figure it out, but you cannot direct deposits to a non-us bank unless you have a non-Us address on your Social security account. Doesn't matter is you have a non-US address, it must be the primary address on your SS account, which means all mailings will be sent there. FYI
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