Taxes in the US for Immigrants: What to Plan Before Moving

When a Brazilian decides to immigrate to the United States, the list of concerns usually revolves around visas, documentation, and cultural adaptation. Tax planning, however, rarely receives the attention it deserves, and this neglect can cost thousands of dollars. From the moment a person becomes a U.S. tax resident, they are required to pay taxes on their worldwide income to the IRS (Internal Revenue Service), including earnings obtained outside the United States.

The American tax system is fundamentally different from the Brazilian one in a key aspect: it taxes based on tax residency, not on where the income was generated. This means that investments in Brazil, rental income, property sales, and foreign bank accounts come under the scrutiny of the American tax authorities as soon as the immigrant crosses the threshold of tax residency. Financial decisions made before the move can result in significant savings or, when ignored, generate unexpected tax liabilities and severe penalties.

Tax Residency in the USA

The definition of a U.S. tax resident is broader than many imagine. For the IRS, there are two main paths to acquire this status, and each has immediate implications for reporting and taxation obligations.

The first and most straightforward is the Green Card Test. Anyone who receives a Green Card is automatically considered a tax resident from the date the status is granted. It does not matter how many days the person has spent on U.S. soil that year; the permanent resident card alone triggers the worldwide income tax obligation.

The second path is the Substantial Presence Test, which applies to people without a Green Card. This test uses a weighted formula: all days of physical presence in the U.S. in the current year, plus one-third of the days in the previous year, plus one-sixth of the days in the two years before that. If the total reaches 183 days and the individual has been in the U.S. for at least 31 days in the current year, they are considered a tax resident.

This rule surprises many Brazilians who hold non-immigrant visas and travel frequently to the United States. The accumulated presence over three years can trigger tax obligations even without any intention of residing permanently in the country.

Worldwide Income and Capital Gains

Once tax residency is established, the IRS requires the declaration of all worldwide income through Form 1040. This includes salaries, rental income, dividends, interest, and, crucially, capital gains from the sale of any asset in any country.

This is where pre-move planning becomes strategically vital. If a Brazilian sells a property in Brazil before becoming a U.S. tax resident, the capital gain is taxed only under Brazilian rules. If the same sale occurs after tax residency, the gain must be reported on the American tax return and may be taxed at federal rates of 0%, 15%, or even 20% for long-term gains, plus a 3.8% surtax (Net Investment Income Tax) for incomes above certain thresholds.

The most effective strategy is to evaluate all assets with significant appreciation potential and consider realizing gains before the start date of U.S. tax residency. Real estate, stocks, investment funds, and other assets should be analyzed on a case-by-case basis with the support of an accountant specializing in international taxation.

FBAR: Foreign Accounts

The FBAR (Foreign Bank Account Report), officially the FinCEN Form 114, is one of the most important and least known obligations for new immigrants. Every U.S. tax resident who owns or has signature authority over foreign financial accounts whose aggregate value exceeds $10,000 at any time during the year is required to report these accounts to FinCEN (Financial Crimes Enforcement Network).

The report is filed electronically, separate from the income tax return, with a deadline of April 15 of the following year and an automatic extension until October 15. Penalties for omission are severe: fines of at least $10,000 per undeclared account per year, even if no tax is owed on the amounts. In cases of willful omission, penalties can reach $100,000 or 50% of the account balance, whichever is greater.

For Brazilians who maintain checking accounts, savings, investments in brokerages, or private pension plans in Brazil, FBAR is an almost inevitable obligation. Pre-immigration planning should include a complete mapping of all existing accounts and the implementation of a record-keeping system that ensures compliance from the first tax year in the U.S.

FATCA and Form 8938

In addition to FBAR, there is FATCA (Foreign Account Tax Compliance Act), which requires the declaration of foreign financial assets through Form 8938, attached to the income tax return. For single taxpayers residing in the U.S., the requirement begins when foreign assets exceed $50,000 on the last day of the tax year or $75,000 at any time during the year.

Although FBAR and FATCA may seem redundant, they are distinct obligations with different forms, deadlines, and recipients. FBAR is sent to FinCEN; Form 8938 is sent to the IRS along with the tax return. Complying with one does not exempt you from complying with the other, and penalties for omission apply separately to each obligation.

What to Do Before Immigrating

Pre-immigration financial planning should ideally begin six to twelve months before the planned move date. The fundamental steps include a sequence of actions that, when carried out in advance, can prevent significant tax surprises.

1. Inventory all assets: real estate, vehicles, bank accounts, investments, private pension plans, and business interests
2. Evaluate accumulated gains in each asset and consider realizing profits before the start of U.S. tax residency
3. Map all foreign financial accounts for early compliance with FBAR and FATCA
4. Consult a CPA (Certified Public Accountant) with experience in international taxation and expatriation
5. Analyze the impact of the tax agreement between Brazil and the U.S. and the possibilities for foreign tax credit
6. Organize the necessary financial documentation for both the immigration process and the first U.S. tax return
7. Plan the transfer of funds considering exchange rates, banking costs, and documentary traceability

States like Florida offer an additional advantage for immigrants: no state income tax, which means residents pay only federal taxes on their income. This feature, combined with competitive living costs in various cities in the state, makes Florida particularly attractive for Brazilians in the process of relocating.

Brazil-U.S. Double Taxation

Brazil and the United States do not have a comprehensive treaty to avoid double taxation on income, unlike the U.S. and dozens of other countries. In practice, the most commonly used mechanism is the Foreign Tax Credit, through which taxes paid to the Brazilian government can be credited against the U.S. tax obligation.

This means that, in many cases, the immigrant will not pay taxes twice on the same income. However, differences in rates and the tax base between the two countries can result in residual balances payable in one jurisdiction or the other. Proper tax planning maps these differences before they become surprises at tax time, allowing informed decisions about the ideal timing to realize gains and transfer funds.

Victoria Harper

Editor-in-Chief

Meet the author

Leading journalism and editorial content at Visto n’ Visa, Victoria helps make immigration topics clear, trustworthy, and easy to understand. Her focus is on delivering useful, human, and relevant content for people exploring new paths abroad.