One of the most popular questions I get during my renunciation webinars and over the 4,000 files I've handled is, "Will I lose my Social Security after I renounce my US citizenship?"
The short answer is 'No.' You won't lose your Social Security with a properly-handled renunciation because most countries have totalization agreements with the United States to avoid such issues with respect to the entitlement.
If you have paid into Social Security for 40 quarters (10 years), you are eligible to collect benefits when of age. Even if you don't have the full 40-quarter credits, you may be able to combine your US work credits with those of work in your now-home country if there is a totalization agreement in place with such provisions. For example, in Canada, there is a totalization agreement that counts the time worked north of the US border for those who meet a minimum time worked in the US (much less than 40 quarters). Keep in mind that the payment amount, should you use time worked in Canada to qualify, will only serve as a calculation based on the time worked in the US. But something is always better than nothing!
If you are eligible to collect Social Security and your renunciation process is done properly, it will in no way affect any payment or collection entitlement after expatriation. Your Social Security number will remain in place; you're just not taxed as a US citizen any longer. Keep the good and get rid of the bad cross-border tax problems.
Here are some other common questions and myths we often encounter on the subject of renunciation:
After I renounce, do I have to file a tax return to the US on the Social Security payments?
Generally, no. While every country is a little different, the vast majority do not require a US Tax return filed post-renunciation on a Social Security payout. Under most fact patterns, the US will withhold a certain amount, and then you are free to do what you want with the rest. After renunciation, you are no longer taxed by the US government on your worldwide assets/income.
What happens to my US retirement plans?
A renounced individual can still hold and receive payments from US-based retirement plans (e.g.) a 401(k), IRAs, ROTHs, stock portfolios, etc.
Can I still collect Medicare?
Yes. If your renunciation is done correctly.
After I renounce, does that remove the US citizenship of my children?
No. Your renunciation does not affect the citizenship status of your children or other family members born before you renounce.
Can I still own US real estate after renouncing?
Yes, you can continue to own, buy and sell US real estate if your renunciation is done properly.
Will I have travel issues once I renounce my US citizenship? Will I be singled out when I travel to the US?
No, you will not have travel issues if you renounce properly and you will avoid being barred from the US for life under the Reed Amendment. Our firm has a flawless record of never having a client barred from the US after renouncing because we will prep you properly for the interview. Thus, one can freely travel into and out of the United States, and you will not be harassed by customs agents just because you renounced. For Canadians, there are no issues with Nexus passes for renounced citizens travelling on Canadian passports born in the United States. If you are renounced properly, you will be treated like every other Canadian or fall-back citizen.
You will notice that a common caveat in our answers is 'if your renunciation is done properly.' It is critical to renounce the correct way to avoid an exit tax, inheritance tax, fees, penalties, and disbarment from the US for life. Attending one of our webinars can put you on the correct path to renouncing the right way.
Moodys Tax Law is only about tax. It is not an add-on service, it is our singular focus. Our Canadian and US lawyers and Chartered Accountants work together to develop effective tax strategies that get results, for individuals and corporate clients with interests in Canada, the US or both. Our strengths lie in Canadian and US cross-border tax advisory services, estateplanning, and tax litigation/dispute resolution. We identify areas of risk and opportunity, and create plans that yield the right balance of protection, optimization and compliance for each of our clients' special circumstances.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.