Lifetime ISA - will (or should) this be taxed in the USA?

Hello,

I opened up a Lifetime ISA here in the UK about two years ago to help with the first time to buy scheme but actually just wondering if this will be taxed in the USA? Is this something I should be showing when I file?

Thanks so much for the clarification.

Well, I think if you have >$10000 in various  UK accounts it will certainly have to be reported in your FBAR

My daughter has one and our dual qualified tax acct treated the bonus as “other income” and the interest as interest. 

My daughter has one and our dual qualified tax acct treated the bonus as “other income” and the interest as interest.

Good info. The IRS doesn’t recognize the tax free wrapper on a regular ISA so it’s not surprising that they don’t recognize the wrapper around a Lifetime ISA.

I treat my lifetime ISA like a normal ISA - fully taxable by the IRS, just like a plain taxable brokerage account.

Bonus is "other income", taxed at income rates

Interest (if a cash LISA) is taxed as interest just like a bank account or bond, at income rates

Dividends and capital gains (if a S&S LISA) is taxed at either income rates (ordinary dividends and short term capital gains) or the lower capital gains rates (qualified dividends and long term capital gains). Your UK broker won't provide reporting on whether they're short/long term or ordinary/qualified dividends, since UK tax doesn't have those concepts. Not too hard to track in Excel yourself.

And hopefully any investments within the LISA aren't PFICs, since the LISA wrapper doesn't shelter them from the IRS's onerous reporting and punitive tax on PFICs.

Per the Bank Secrecy Act, every year you must report certain foreign financial accounts, such as bank accounts, brokerage accounts and mutual funds, to the Treasury Department and keep certain records of those accounts. You report the accounts by filing a Report of Foreign Bank and Financial Accounts (FBAR) on Financial Crimes Enforcement Network (FinCEN) Form 114.

A U.S. person, including a citizen, resident, corporation, partnership, limited liability company, trust and estate, must file an FBAR to report:

- a financial interest in or signature or other authority over at least one financial account located outside the United States if
- the aggregate value of those foreign financial accounts exceeded $10,000 at any time during the calendar year reported.

Generally, an account at a financial institution located outside the United States is a foreign financial account. Whether the account produced taxable income has no effect on whether the account is a foreign financial account for FBAR purposes.

Emphasis mine. For more information, you could check out:

https://www.irs.gov/businesses/small-businesses-self-employed/report-of-foreign-bank-and-financial-accounts-fbar

I report my current accounts, saving account, joint account, and ISA account each year as combined, they meet the FBAR reporting criteria.

EDIT - I've yet to owe taxes on them, but the accounts still have to be declared if in total, they are worth more than 10k USD.