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Topic: LISA for USC  (Read 476 times)

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LISA for USC
« on: September 11, 2021, 01:47:45 PM »
Hello everyone

We're thinking of moving in 12months+. I own the mortgage on our current flat as a UKC so I can't take out a LISA. My husband is a USC living with me in the UK for nearly 2 years now, and we'd like to take out a LISA in his name so that we can get a 1k bonus this tax year and another 1k bonus next tax year before our move completes hopefully in the final quarter of 2022.

But...

The IRS wants to get its greedy mitts on everything! My understanding currently is that a cash LISA is our best bet, as we still get the government bonus and the figures we're talking about in terms of savings and interest would be too small to trigger US taxes (although we'd still have to do a tax return). I believe a stocks and shares LISA is potentially a nightmare as any capital gains or dividends would be of interest to the IRS.

Anyone got any insight or experience of this minefield?

Thanks :)
G&T
Met online: April 2017 | Met in person: March 2018 | Entered relationship: October 2018 | Engaged: Feb 2019 | Wedding: August 2019
Application package sent: 14 Aug 2019 | Package rec'd in New York: 16 Aug 2019 | Package rec'd email: 20 Aug 2019
Decision made email: 19 Sept 2019 (23WD) | Passport received (approval!) 23 Sept (25WD)


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Re: LISA for USC
« Reply #1 on: September 11, 2021, 05:55:28 PM »
Definitely don’t do the stocks and shares LISA unless you are prepared to pick individual company stocks.The IRS does not recognize the tax free wrapper of ISAs so will tax the interest on cash-ISAs and dividends from shares held within a stocks and shares ISA but if you hold funds within a stocks and shares ISA (or LISA) they will tax them punitively as a PFIC.
Dual USC/UKC living in the UK since May 2016


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Re: LISA for USC
« Reply #2 on: September 13, 2021, 07:42:39 AM »
Agree with durhamlad - individual stocks only in a S&S LISA (or S&S ISA, for that matter).

And agree with GregandTre that a cash LISA makes the most sense. Even aside from all the tax questions, you probably wouldn't want to put money at risk when you're going to need it in just over a year. The risk/reward on gains vs losses in the market doesn't make sense.

I believe the government bonus will also be US taxable income - have never seen an argument otherwise, although I'd be interested if somebody has one. So that's the bigger chunk for the IRS, the interest will be miniscule at today's rates, but £1k of interest each year could result in you owing some cash to the IRS, depending on the rest of your tax return.


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