PRACTICE AREAS
Pre-Immigration Tax Planning Checklist
Key steps before you become a U.S. tax resident
The United States taxes its residents on worldwide income — from the moment residency begins. For foreign nationals arriving with foreign businesses, investment portfolios, foreign trusts, and offshore accounts, that transition carries both significant risk and significant opportunity. The decisions made before a client becomes a U.S. tax resident often determine the tax landscape for decades to come.
This checklist is designed to help individuals, families, and their advisors identify the key planning steps that should be addressed before U.S. tax residency begins. It is not exhaustive — every client’s situation is different — but it covers the issues that arise most frequently and carry the greatest consequences if left unaddressed.
Once U.S. tax residency is established, many of the most powerful restructuring opportunities are gone. The time to plan is now.
Who should use this?
This checklist is for foreign nationals who are planning to relocate to the United States — whether through a green card, long-term visa, or extended physical presence — and for the attorneys, accountants, immigration counsel, and family office advisors who work with them. It is most valuable when used 6 to 24 months before the anticipated U.S. residency start date.
Section 1
Residency Timing
Residency timing is the foundation of all pre-immigration planning. The date U.S. tax residency begins determines which opportunities are still available and which have closed.
- Identify your anticipated U.S. residency start date — for green card holders, this is the date of first U.S. entry in lawful permanent resident status (not the date the green card is issued); for others, the date on which you expect to meet the Substantial Presence Test.
The Substantial Presence Test counts days in the current year plus 1/3 of days in the prior year and 1/6 of days two years prior. Travel patterns matter.
- Analyze whether your current travel pattern will trigger U.S. tax residency earlier than anticipated.
- Determine whether a tax treaty tie-breaker position is available if you are moving from a country with a U.S. income tax treaty.
Treaty tie-breakers can defer or limit U.S. residency in the year of arrival but require affirmative filing and have their own compliance requirements.
- Plan your dual-status year — the year in which you transition from non-resident to resident — to minimize U.S. tax exposure on pre-residency income.
- Engage U.S. tax counsel and coordinate with immigration counsel on visa timing before making travel or relocation decisions.
Section 2
Foreign Business Interests
Once a foreign national becomes a U.S. tax resident, interests in foreign corporations may become subject to the controlled foreign corporation (CFC) rules — triggering immediate U.S. taxation on certain categories of income regardless of whether it is distributed.
- Inventory all interests in foreign corporations, partnerships, and other business entities.
- Analyze whether any foreign corporations will become CFCs upon U.S. residency — triggering Subpart F income, NCTI inclusions, and Form 5471 filing obligations.
- Evaluate check-the-box elections for foreign entities before residency begins.
Electing disregarded entity or partnership status for certain foreign corporations before immigration can eliminate CFC exposure entirely in some cases.
- Consider whether restructuring, sale, or liquidation of foreign business interests before residency is more tax-efficient than holding them as a U.S. resident.
- Identify any transfer pricing implications for ongoing related-party transactions between foreign entities and any planned U.S. operations.
- Confirm that all foreign entity reporting obligations — Forms 5471, 5472, 8865, 8858 — are understood and compliance counsel is engaged.
Section 3
Foreign Investment Portfolio — PFIC Analysis
Foreign mutual funds, ETFs, and many other non-U.S. investment vehicles are classified as passive foreign investment companies (PFICs) under U.S. tax law. The PFIC rules are among the harshest in the Internal Revenue Code — imposing punitive tax and interest charges on distributions and dispositions unless a timely election is made.
- Identify all foreign mutual funds, ETFs, unit trusts, and other pooled investment vehicles in your portfolio — these are almost always PFICs.
- Analyze whether a QEF (Qualified Electing Fund) or mark-to-market election should be made for each PFIC holding in the first year of U.S. residency.
QEF and MTM elections must be made on a timely basis. Missing the first-year window can result in the default PFIC regime applying — the most punitive outcome.
- Consider liquidating PFIC holdings before U.S. residency begins to avoid the PFIC regime entirely.
Pre-immigration dispositions of PFICs are not subject to U.S. tax. This is often the cleanest solution when the investment can be replaced with a non-PFIC equivalent.
- Assess whether any foreign life insurance or annuity products may be classified as PFICs or have other adverse U.S. tax consequences.
- Confirm that Form 8621 filing obligations for each PFIC are understood — one form is required per PFIC per year.
Section 4
Foreign Trusts
Foreign trusts with U.S. grantors or beneficiaries trigger some of the most complex — and most penalized — reporting obligations in U.S. international tax law. The analysis must be completed before residency begins.
| Step | Action | What to know |
|---|---|---|
| Identify | Identify all foreign trusts in which you serve as grantor, trustee, or beneficiary. | Any of the three roles creates a U.S. connection once you are a U.S. person. |
| Classify | Determine whether each trust will be classified as a foreign grantor trust or a foreign non-grantor trust upon your U.S. residency. | Grantor trust status is generally more favorable — the grantor is taxed on income currently but distributions to U.S. beneficiaries are tax-free. Non-grantor trust distributions may be subject to the throwback rules and interest charges. |
| Restructure | Evaluate whether restructuring the trust before residency — including changes to trustee, distribution provisions, or governing law — is advisable. | Changes are far easier to make before U.S. residency begins. |
| Report | Understand Form 3520 and Form 3520-A reporting obligations that will apply once you are a U.S. person with a foreign trust connection. | Penalties for failure to file Forms 3520 and 3520-A begin at $10,000 per violation and can reach 35% of the gross value of trust assets or distributions. |
| Distributions | If you are a beneficiary of a foreign non-grantor trust, analyze potential accumulation distribution tax and interest charges on undistributed net income. | Accumulated income distributed after residency can carry a throwback charge. |
Section 5
Foreign Real Estate & Asset Basis
Once U.S. tax residency begins, gain on the sale of foreign real estate and other foreign assets is subject to U.S. income tax. The tax basis of those assets is fixed at the time of acquisition, not at the time residency begins, unless planning is done in advance.
- Inventory all foreign real estate, investment accounts, artwork, and other significant foreign assets and obtain current fair market value appraisals.
- Consider selling and repurchasing appreciated foreign assets before residency begins to establish a higher U.S. tax basis.
A pre-immigration sale and repurchase — even at the same price — resets the tax basis to fair market value. Gain on the subsequent U.S.-period appreciation is then reduced accordingly.
- Analyze whether foreign real estate held for investment should be restructured, contributed to an entity, or transferred before residency.
- Review whether any foreign asset dispositions before residency will trigger foreign capital gains tax in the country of situs, and coordinate with foreign counsel.
Section 6
Pre-Immigration Estate, Gift & Transfer Tax Planning
The U.S. gift and estate tax regime applies to U.S. persons on worldwide assets. The window to make transfers and restructure existing estate plans outside that regime closes when residency begins.
- Review your existing estate plan — wills, trusts, powers of attorney — and determine whether it needs to be restructured for a U.S. person subject to worldwide estate and gift tax exposure.
U.S. persons are subject to estate tax on worldwide assets above the federal exemption (currently $13.99 million in 2026). The exemption is scheduled to be significantly reduced after 2025 absent further legislation — confirm the current amount with counsel.
- If your estate plan includes civil law structures — usufructs, bare ownership transfers, forced heirship arrangements — analyze how these are treated under U.S. estate and gift tax law before residency begins.
Usufructs and similar civil law arrangements can have significant U.S. tax consequences, including potential IRC §2036 retained interest issues, that must be addressed before you become a U.S. person.
- Consider making gifts of appreciated foreign assets to non-U.S. family members before residency — while you are still outside the U.S. gift tax system.
- Analyze whether transfers to non-U.S. family members should be completed before residency to avoid future Section 2801 implications if you ever expatriate.
- Engage an estate planning attorney in your destination U.S. state to draft or update your will, powers of attorney, and healthcare directives before or shortly after arrival.
Section 7
Foreign Bank Accounts, Reporting & Coordination
U.S. tax residency triggers immediate reporting obligations for foreign financial accounts, entities, and trusts. The earlier advisors are engaged, the more planning options remain available.
- List all foreign bank accounts, brokerage accounts, and pension accounts that will be reportable as a U.S. person — FBAR filing is required if the aggregate exceeds $10,000 at any point during the year.
- Understand Form 8938 (FATCA) obligations — broader than FBAR, covering specified foreign financial assets above threshold amounts that vary by filing status and residency.
- Evaluate whether any foreign accounts should be closed, consolidated, or transferred to simplify compliance in year one.
- Engage U.S. international tax counsel at least 12 to 24 months before the anticipated residency date — many planning opportunities are time-sensitive.
- Coordinate with immigration counsel on visa timing — the visa type and effective date can affect when U.S. tax residency begins.
- Notify your foreign tax advisor and financial advisor of the planned move — PFIC, CFC, and foreign trust implications of your current portfolio must be addressed before arrival.