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LearnFAQImmigrant & NRI Finance

Why does the U.S. tax my worldwide income while my home country only taxes local income?

Answer

Most countries, including India and much of Europe, use residence-based or territorial taxation, taxing you mainly on income earned within their borders or while you reside there. The U.S. is unusual in taxing its citizens and tax residents on worldwide income regardless of where it is earned. Once you become a U.S. resident alien under the green-card or substantial-presence test, your interest, dividends, rental income, and capital gains from anywhere on earth become reportable on your U.S. return. To prevent double taxation, the U.S. offers the Foreign Tax Credit, the Foreign Earned Income Exclusion, and treaty provisions. So you rarely pay full tax twice, but you must still report everything. Understanding this shift is the single biggest adjustment new immigrants face; the WealthSerene immigrant-readiness assessment at wealthserene.com/assessments/immigrant-readiness can help you get oriented.

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