Tax Planning Before Moving Abroad — The Expat Checklist
Reviewed by the Fairlight Accounting cross-border tax team — U.S. & Canadian Tax Desks
Pre-move tax planning for expats is the set of decisions made before leaving the United States that determine how expensive the years abroad will be: which state you leave from, what happens to retirement accounts and investments, how the new country treats U.S. income, and how records are set up. Most are easy before departure and difficult or impossible after.
On this page
- Which state am I leaving from?
- What should I do with retirement accounts?
- What should I do with investments?
- Have I read the treaty and the totalization agreement?
- What should change on payroll?
- What records should I set up now?
- What should I decide about selling the U.S. home?
- Frequently asked questions
- Next step
Which state am I leaving from?
The last state of residence sets the rules for whether you can stop filing there. Leaving from a state with no income tax, or from one that releases departing residents easily, is simpler than leaving from one that holds on. If your work allows, establishing residence in a no-tax state first — then moving abroad from there — removes the question entirely. Either way, document the break: sell or lease the home, change licenses and registrations, move accounts, and record the departure date.
What should I do with retirement accounts?
Three decisions:
- Contribution strategy. If you'll exclude your foreign salary, you won't have compensation for IRA contributions abroad. Fund this year's IRA before you leave.
- Roth conversions. Some countries don't recognize the Roth's tax-free status and will tax withdrawals. If you plan to convert, the year before a move to such a country — while still a U.S. resident — may be the only clean window. In countries that respect the Roth, there's no rush.
- Custodian. Confirm your IRA and brokerage custodians accept foreign addresses. Some close accounts; move to one that doesn't before your address changes.
What should I do with investments?
Avoid buying funds abroad. Non-U.S. mutual funds and ETFs are passive foreign investment companies for U.S. purposes, with punitive tax and annual Form 8621 reporting. Keep investing through U.S.-domiciled funds at a U.S. broker that serves expats — and check how your new country taxes U.S. funds, since a few penalize them in the other direction. If you already hold investments with large unrealized gains, consider whether your new country will tax the gain when you sell; a sale before you become resident there can be cleaner.
Have I read the treaty and the totalization agreement?
Two documents decide a lot. The income tax treaty (if one exists) governs pensions, Social Security, withholding on U.S. investments, and the tie-breaker; the totalization agreement (if one exists) decides which Social Security system you pay into and whether a U.S. employer assignment keeps you U.S.-covered. Knowing before the move whether your country has neither, one, or both changes the self-employment tax answer, the pension answer, and the exclusion-versus-credit choice.
What should change on payroll?
If you stay with a U.S. employer, prepare Form 673 to stop federal withholding on wages you'll exclude, ask payroll to stop state withholding and update your address, and confirm how they'll handle Social Security coverage in your country. If you're leaving U.S. employment, plan for estimated payments on any U.S. tax that will remain — self-employment tax especially.
What records should I set up now?
A day log from the departure date (passport stamps, flights); a folder for the lease and residence documents abroad; the acquisition dates and dollar basis of every investment and property you own, which you'll need for currency calculations years from now; and a list of every account with its opening date, since the FBAR applies from the first year the combined total exceeds $10,000.
What should I decide about selling the U.S. home?
Selling before the move captures the home-sale exclusion cleanly and ends state ties. Renting it out keeps a state-source income filing every year and, in sticky states, weakens the residency break. If you keep it, understand both consequences going in.
Frequently asked questions
How far ahead should I start?
Six months lets you handle a Roth conversion, custodian changes, and the state exit in the right tax year. Less is workable; a week is not.
Do I need to tell the IRS I'm moving?
Not specifically, but update your address with Form 8822 so notices reach you, and keep filing every year.
Should I close my U.S. bank accounts?
No — keep at least one. You'll need it for IRS payments and refunds, Social Security, and U.S. investments, and many foreign banks are wary of U.S. persons.
Is a short consultation worth it before a move?
Yes. The decisions above are cheap to get right and expensive to unwind, and most are irreversible once you're resident abroad.
Next step
Fairlight Accounting handles U.S. domestic, cross-border (U.S.–Canada), and international tax returns, plus bookkeeping, payroll, and CFO advisory. If you're planning a move abroad, our U.S. Tax Desk can work through this checklist against your country and your accounts before anything is locked in. See pricing or book a free fit call.
Cross-border taxes, handled in one place
U.S. and Canadian filings prepared together by our U.S. and Canadian Tax Desks.
Book a free fit call