Moving US to UK (England)

[angiehill321]

I am moving from Florida to London in the spring of 2023, and I am a dual citizen. My taxes are usually pretty straightforward, as I am 54 years old, disabled, just living on SSDI and child support for my 12-year-old child, who will be the only person moving with me. I don’t have any savings or assets. I usually only file my non-mandatory taxes so that I can get my Earned Income Child Support return, and I usually work a very little part time job throughout the year to qualify for that. I do also do my tax return for the FAFSA for my college-age daughter, who is still technically a dependent. 

A) How will this move affect my US taxes?

B) My 20-year-old would still be a dependent; she has one more year of school. But would that make her an international student for her last year at Berklee? Do I have a choice to not claim her as a dependent if that becomes necessary for her school, since she could primarily still live in the US? 

C) Also, pre-pandemic I earned about $8,000 in wages and got an EITC of around $7,000. During 2020 and 2021, I earned much less but was able to input my pre-pandemic wages, so I still got a similar EITC. In 2022, I have had surgery and health problems and have only earned about $299. How will this affect my EITC, and how much would I have to earn to get the full EITC amount possible refunded? 

Thank you so much!! 

Angela

[NateTheGrEAt]

Hi @angiehill321  and thanks for your questions!

There's a lot to unpack here - let's take it one step at a time. 

How will this move affect my US taxes?

For your particular situation, the largest item that jumps out to me is that once you have lived outside the US for more than half of a tax year, you will no longer qualify for the Earned Income Credit. So for 2023 and any future year where you spend more than half the year outside the US you won't be able to receive the EIC. Also, any year where you use Form 2555 to claim the Foreign Earned Income Exclusion would be a year in which you are not eligible to receive EIC.

Aside from that, not much changes. As a US citizen you have to file taxes on all income earned worldwide. You may be able to take the Foreign Tax Credit or use the Foreign Earned Income Exclusion to reduce or avoid US taxation on income earned abroad. 

 My 20-year-old would still be a dependent; she has one more year of school. But would that make her an international student for her last year at Berklee?

This is really a better question for the financial aid office than for a tax advisor - the school may have its own definition of an international student. Although, my non-expert opinion is that since your 20-year-old would still be a US citizen and primarily living in the US, it seems unlikely to me that they would suddenly be considered an international student by virtue of your move. 

Do I have a choice to not claim her as a dependent if that becomes necessary for her school, since she could primarily still live in the US? 

I would check with the financial aid office on this first, also. Their answer to the above question may make this question moot. Also, since you are still filing US taxes (even though you will be living abroad), the FAFSA process should still work in the same way as it does now. 

How will this affect my EITC, and how much would I have to earn to get the full EITC amount possible refunded? 

As noted above, if you move outside the US in early 2023, then for 2023 and any future year where you are outside the US for more than half the year, you would not qualify for EIC. 

For 2022, there is no provision to use prior year earned income to calculate EIC. It would be based only on your actual earnings during 2022. You can check the tables in the back of IRS Publication 596 to see EIC amounts based on your income. As a head of household (single parent with 1 or 2 dependents) the maximum EIC amount is earned when you have earned income in roughly the $15,000-$20,000 range. But with your earned income being low at this point in the year, every additional dollar you can earn before 12/31 will increase your EIC amount.

I hope this information is helpful! Good luck on the move.

[Opus 17]

Do I have a choice to not claim her as a dependent if that becomes necessary for her school, since she could primarily still live in the US? 

You have the question turned around.  A parent is never required to claim a child as a dependent on their tax return.  However, the child must answer "yes, I can be claimed as a dependent by another taxpayer" if they can be claimed, even if they don't want to be claimed, and even if the person who could claim them has decided not to claim them.

For 2022, your older child probably must check "I can be claimed as a dependent" on their 2022 tax return (although this depends on facts not in evidence).   Assuming they could be claimed, whether or not you claim them is up to you.  (I believe the FAFSA is looking for that answer on their tax return, even if you don't actually claim them.) However, the school should be able to assess their needs for your special circumstances.  

For 2023 (to be filed in the Spring of 2024) it is likely that the child will not qualify to be claimed as a dependent (even if you wanted to), because they won't live in your home more than half the year.  Under normal circumstances, a child away at college is considered to "live at home" because college is a temporary absence, but where the parent has relocated out of the country, it is probably not reasonable to consider the child to be living "at home" when the parent's home is a place in a foreign country where they have never lived except for short visits.  (Unless the child moves in with you in a substantial and non-temporary way.)

[mikafeed58]

Ordinarily, I would say that you do not have a filing requirement and would only file a tax return for the reasons you stated. Let's address these one at a time:

Since there was no new legislation in 2022 to extend the "Lookback Provision," you will have to use your 2022 income which falls short of the EITC Credit Threshold. If that were the only reason I would not file a tax return.

If FAFSA requires you to provide a tax return that may be a legitimate reason for filing a return.  You will have to determine which position is better for your dependent daughter in regards to her domicile which can either be London with you or California (USB) if she will be considered an International Student and subject to out of state tuition. You will have to the support element of dependency to consider if you choose not to use London as her domicile.

For further information on dependency, please see the IRS link below:

https://www.irs.gov/faqs/filing-requirements-status-dependents/dependents/dependents-2#:~:text=To%20....