U.S. accounts from abroad: banks, brokers and IRAs
Your U.S. accounts are often the simplest part of your finances abroad. They don't go on the FBAR, and U.S. funds avoid the PFIC rules. The challenge is keeping them open, and knowing when you can still put money into retirement accounts.
The short version
- U.S. bank and brokerage accounts don't go on the FBAR or Form 8938.
- Some U.S. banks and brokers restrict or close accounts once your address is foreign. Ask before you move.
- U.S.-registered funds avoid the PFIC rules that make most foreign funds expensive.
- You can only put money into an IRA if you have earned income you don't exclude.
1Keeping your accounts open
U.S. banks and brokers decide for themselves whether to serve clients abroad. Some restrict trading or close accounts once your address is foreign, partly because of other countries' securities rules. In the European Union, for example, rules on investor documents can stop brokers from selling U.S.-listed funds to local residents.
Tell your bank and broker before you move, and ask what they allow for clients abroad. Using a relative's U.S. address to keep an account open can cause problems, with the broker and with your old state.
2U.S. funds vs. local funds
A mutual fund or ETF registered outside the U.S. is usually a PFIC, with high U.S. tax and a Form 8621 each year. U.S.-registered funds aren't PFICs. So keeping your investments in a U.S. account is often the cleanest option, if your broker lets you.
The same index can be simple or costly, depending on where the fund is registered.
3IRAs and Roth IRAs
- You need taxable compensation to contribute. Wages you exclude with the foreign earned income exclusion don't count.
- With the foreign tax credit instead, your foreign wages stay taxable compensation, so you can usually contribute.
- Roth IRA income limits count the income you exclude abroad.
- Withdrawals work as usual: taxable when you take them, with a 10% penalty before age 59½ unless an exception applies.
4401(k)s and other plans
A 401(k) from a U.S. employer can stay where it is after you move, and payments from it are taxable for the U.S. when you take them. You can only keep contributing through a U.S. employer's plan. Moving money from a foreign pension into an IRA or 401(k) generally isn't allowed as a tax-free rollover.
5How your new country sees them
Your new country may not recognize the tax breaks on U.S. accounts. Some treaties protect IRAs and 401(k)s and some don't, and a Roth IRA's tax-free payouts may be taxable locally. Investment income from U.S. accounts is usually taxed by your new country too, with the foreign tax credit sorting out the overlap. We look at both sides before you move money.
Stopped filing after you moved, with U.S. accounts still earning? The Streamlined Foreign Offshore Procedures let Americans abroad catch up with no penalty, if they qualify. See IRS tax amnesty options for expats.
Common questions
Do U.S. accounts go on my FBAR?
No. The FBAR and Form 8938 are for foreign accounts. Accounts at U.S. banks and brokers aren't on them, even if they hold foreign shares.
My broker is closing my account. What can I do?
Ask whether they have a service for clients abroad, or move to a broker that accepts foreign addresses. Moving holdings between U.S. brokers usually isn't taxable.
Can I open an IRA while living abroad?
Yes, if your broker accepts clients abroad and you have compensation you don't exclude.
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Reviewed by Lewis Grunfeld, CPA. Based on IRS Publication 590-A. General information, not advice for your specific situation.