McKinney Cross-Border Tax

International Ties in a Growing City

McKinney's growth has brought families from India, Mexico, Nigeria, Canada and elsewhere, and some of its larger employers have foreign owners. Foreign investors also buy land and homes in the area. BOMCAS handles cross-border tax for McKinney clients remotely.

Canada–U.S. rules and treaty points in general are on the Texas cross-border tax page; this page covers McKinney's newcomers and foreign investors.

New Residents

People moving to McKinney from abroad become U.S. tax residents under the green card or substantial presence test, and are taxed on worldwide income from then on. Accounts, pensions and property at home must be reported, and income on them included in the U.S. return.

Foreign Accounts and Assets

FBARs are filed when foreign accounts total more than $10,000 at any time in the year. Form 8938 is filed when foreign financial assets exceed higher thresholds. Foreign mutual funds may be passive foreign investment companies, requiring Form 8621.

Foreign-Owned Companies

Companies in McKinney owned by foreign groups file U.S. returns and Form 5472 for transactions with related parties, which must be priced at arm's length. A $25,000 penalty applies to each missing form.

Foreign Investors in Land and Homes

Foreign individuals and companies that own McKinney land or rental homes file U.S. returns on their rental income, usually electing to be taxed on net income rather than 30 percent of gross rent. When they sell, FIRPTA withholding of 15 percent of the price generally applies, and the seller files a return to report the actual gain.

Canadian Residents

Canadians who retire to McKinney or work here on TN visas become U.S. residents. RRSPs and RRIFs keep their tax deferral under the treaty, while TFSAs do not. Canadian pensions and Old Age Security are taxed under treaty rules. Those who keep Canadian property report the income in both countries with credits.

Mexican and Nigerian Families

Families from Mexico can use the U.S.–Mexico treaty for double tax. Nigeria has no income tax treaty with the United States, so foreign tax credits are the main relief for income from Nigeria.

Property in Mexico

Americans and residents who own beach property in Mexico through a fideicomiso, a bank trust required in coastal and border zones, have long asked whether it is a foreign trust. The IRS ruled in 2013 that a typical fideicomiso is not treated as a trust for U.S. tax purposes, so the trust forms do not apply, but rental income and gains on the property are still reported.

Non-Citizen Spouses

When one spouse is not a U.S. citizen, the unlimited marital deduction for gifts and estates does not apply. Gifts to a non-citizen spouse have a larger annual exclusion than the usual $19,000, adjusted each year, and a qualified domestic trust can defer estate tax on assets left to a non-citizen spouse. Couples in this situation should plan with their attorney.

Working Abroad From McKinney

Residents who take assignments abroad remain subject to U.S. tax and may use the foreign earned income exclusion or foreign tax credits. Those who keep their McKinney home should check the effect on the homestead exemption, since a home rented out while they are away may no longer qualify, and on the later home sale exclusion.

Common Filings

Form 1040 with foreign income.
FBAR and Form 8938.
Form 8621.
Form 5472.
Form 1040-NR for nonresident investors.
Form 8288 FIRPTA withholding.