The day you become a U.S. tax resident, the IRS begins taxing your worldwide income. Assets you’ve held for decades, foreign companies you own, and trust structures that worked perfectly in your home country may suddenly create U.S. tax and reporting obligations you didn’t anticipate. Most of these issues are fixable before you arrive, but very difficult to unwind after.
Why Timing Matters
U.S. tax residency begins on the date you receive a green card or, for visa holders, when you meet the Substantial Presence Test (183 days in the U.S. using a weighted three-year formula). From that date forward:
- All worldwide income is subject to U.S. federal income tax
- Foreign financial accounts above $10,000 in aggregate must be reported annually via FBAR
- Foreign corporations you own may trigger GILTI, Subpart F, and PFIC rules
- Foreign trusts become subject to punitive U.S. reporting and potential income inclusion
Planning done before your residency start date can restructure assets, step up basis, and simplify your tax profile before the U.S. rules attach.
The Green Card Trap
A green card makes you a lawful permanent resident and a U.S. tax resident for life, even if you later move abroad. Unlike visa-based residency, a green card cannot be paused. Surrendering it triggers expatriation rules (the exit tax under IRC §877A) if your net worth exceeds $2 million or your average annual tax over the prior 5 years exceeds the indexed threshold.
If you are considering a green card and have significant assets abroad, understanding the long-term tax implications before accepting it is essential.
Step-Up in Asset Basis
One of the most valuable pre-immigration moves is establishing a step-up in basis on appreciated assets before you become a U.S. tax resident. Because the U.S. taxes gains from the date of residency forward, assets with built-in gains accrued before arrival are not subject to U.S. capital gains tax if sold before residency begins.
Some countries allow a deemed disposition at fair market value on departure, which establishes the basis the U.S. will recognize. Others do not. The interaction between your home country’s exit rules and the U.S. entry basis rules requires careful coordination.
Foreign Trust Rules
Foreign trusts, which are common estate planning vehicles in many countries, face some of the most aggressive U.S. tax rules. Once you become a U.S. tax resident:
- As a U.S. grantor, you may be taxed on all trust income annually
- Loans and distributions from the trust to you or your U.S. family members trigger income inclusion and potential penalties
- Annual reporting on Form 3520 and Form 3520-A is required, with penalties of up to 35% of distributions for failures
If you have interests in foreign trusts, restructuring or distributing assets before becoming a U.S. resident is often far simpler than managing ongoing compliance.
Check-the-Box Elections for Foreign Corporations
If you own a foreign corporation, the U.S. treats it as either a corporation (separate taxable entity with potential GILTI and Subpart F exposure) or, if you make a check-the-box election, as a disregarded entity or partnership.
A check-the-box election made before you become a U.S. resident can be treated as a deemed liquidation of the corporation that, in the right circumstances, steps up the basis of assets inside the corporation without triggering U.S. tax. After residency, the same election is a taxable event you pay for immediately.
What to Do Before You Arrive
A pre-immigration checklist should include:
- Inventory all foreign assets: bank accounts, brokerage accounts, real estate, business interests, trusts, and life insurance policies
- Establish fair market values as of your anticipated residency start date
- Review foreign corporate structures for GILTI, PFIC, and Subpart F exposure; simplify where possible
- Consider check-the-box elections for eligible foreign entities before your residency date
- Distribute or restructure foreign trusts if ongoing U.S. compliance costs outweigh the benefits
- Open U.S. bank and brokerage accounts before arriving if possible, as foreign accounts often restrict U.S. residents
- Confirm your residency start date and document it precisely
When to Seek Help
Pre-immigration planning is one of the most time-sensitive areas in international tax. The window closes on your residency start date, and many of the best moves require 30–90 days to execute properly. If you have a planned move date, starting the analysis 6 months in advance is not excessive.
Last updated: 2026