Pre-Immigration Tax Planning Before You Become a US Person

When You Become a US Taxpayer, and Why the Date Is a Hard Deadline

Your residency starting date divides two very different tax positions. Before it, you are a nonresident, and the US taxes only your US-source income and reaches your estate and gifts only through US property. On and after it, you are a worldwide US taxpayer, reporting income from everywhere and filing foreign-account and foreign-asset forms each year. Everything valuable in a pre-immigration plan has to be finished before that date, and any transfer has to be complete by then.

You can reach that date two ways. The first is the green-card test, which makes you a US tax resident on the first day you are physically present in the US as a lawful permanent resident. A green-card holder who "isn’t really moving yet" can start worldwide taxation with one airport landing. The second is the substantial-presence test (a day-counting formula that can make you a US taxpayer with no green card at all), which takes 31 days in the US this year plus a weighted total of 183 days across three years, counting this year in full, one-third of last year, and one-sixth of the year before. Because prior years feed the count, a snowbird who spends 122 days here every year reaches 183 in the third year without meaning to.

The first year is usually a split, or dual-status, year, with nonresident months before the date and resident months after. The first thing we do is run the three-year day count and pin the start date, because every step below has a deadline measured against it. Pre-immigration planning is the inbound mirror of the US exit tax, which is also a before-the-date exercise. On the way in you plan before the clock starts, and on the way out you plan before it stops.

Reset Your Basis Before You Arrive

A nonresident generally pays no US income tax on gains from foreign assets, and no US tax on gains from US-company stock if present in the US fewer than 183 days in the year of sale. Selling appreciated assets to unrelated buyers shortly before your residency starting date, and then buying them back, sets a new market-value cost basis at no US cost. When you later sell as a US resident, only the appreciation after you arrived is taxed. Shares bought abroad for $100,000 and worth $1,000,000 carry $900,000 of gain, and a sale and repurchase before the start date takes that $900,000 out of the US tax base.

Many new arrivals assume the reset happens on its own. The law does give an immigrant a market-value basis as of the start date, but only for the exit tax if you later give up US status. For ordinary income tax, you keep your old basis, often close to zero, for every future sale, and the full pre-immigration gain is taxed when you sell. An actual sale and repurchase is the only way to get an income-tax basis reset.

The reset works asset by asset, because each class of asset is taxed differently.

• Foreign stock, foreign real estate and foreign business interests reset for free, because the gain is foreign-source and untaxed to a nonresident.
• US-company stock resets tax-free only if you are in the US fewer than 183 days in the year of sale. Otherwise the gain can be taxed.
• US real estate works the other way. Selling US property triggers US tax and withholding under the rules for foreign owners of US real estate, so a sale to reset basis costs real money. Our page on FIRPTA withholding on US real estate explains those rules.
• Foreign mutual funds can be cleaned up by the same sale, and you still plan the fund election for your first US year, covered below.

Two execution points decide whether the reset holds. The sale has to be a genuine arm’s-length sale to an unrelated buyer, because the IRS can disregard a transfer to an entity you control. And you have to document market value at the time, with a real buyer and a real valuation. We co-counsel the modeling behind the reset with an international tax advisor.

Pull Income Into the Nonresident Window

Your start date turns on worldwide taxation, so the same dollar of income can be free of US tax or fully taxed depending on which side of the date it lands. Where you have a choice, you take the income before the date.

A dividend from your foreign company paid while you are a nonresident is foreign-source and free of US tax. Paid the day after you become a US person, the same dividend is worldwide income on your US return. A foreign pension lump sum or a deferred-compensation payout triggered before the date is likewise outside US tax, and triggered after the date, it is taxed. Gains you want to realize anyway are better taken before the date, when a nonresident pays no US tax on foreign assets, than afterward at resident rates. The same sale that resets basis can be timed to keep the gain out of the US tax base entirely.

Which Foreign Holdings Change the Day You Become a US Person?

Some holdings cost nothing in US tax while you are a nonresident and become expensive the day you become a US person. Left alone, they can tax you every year on money you never received. Three kinds of holding need attention before the date.

• A foreign company can become a controlled foreign corporation. A closely held foreign company is outside US tax while you are a nonresident. Once you are a US shareholder, the company can become a controlled foreign corporation, which puts part of its earnings on your US return each year even if nothing is distributed. The fixes, meaning distributing earnings while you are still a nonresident or restructuring the company, have to be done before the date.
• A foreign fund can become a PFIC. A foreign mutual fund or pooled investment can become a passive foreign investment company (a foreign fund the US taxes under a heavy default regime, with an interest charge on top). A specific election in your first US year avoids the default rules, and a sale and repurchase before arrival can reset the holding cleanly. Our page on PFIC rules for Israeli funds covers the most common case.
• Foreign trusts and foreign pensions carry new duties. A foreign trust you are connected to can start carrying US income and reporting duties, and so can a foreign pension. Funding a foreign trust after you become a US person can also trigger a deemed sale, taxing built-in gain on the way in, which a nonresident’s funding never triggers. The trust step in the next section has to happen before the date for that reason.

None of these holdings is a reason to panic or a reason to wait. Each one belongs on a list of every foreign company, fund, trust and pension you hold, checked against the calendar before your start date, usually with an international tax advisor who models the numbers.

Every Form W-8BEN on file with a US broker or payer becomes wrong on the day you become a US person, and the rules give you 30 days to tell the payer about the change in circumstances. New arrivals often miss the notice, and the payer keeps applying a treaty rate that no longer belongs to them. Our guide to Form W-8BEN and the change-in-circumstances rule covers what has to be refreshed and when.

The Foreign-Trust Move and the Five-Year Clock

For a client with substantial wealth, a strong step before arrival is to place assets irrevocably in a foreign trust that is not treated as owned by any one person (a foreign non-grantor trust), often called a drop-off trust. Funded while you are still a nonresident, a completed transfer of foreign-situs property, and of US intangibles such as publicly traded stock, sits outside the future US estate tax. The trust itself is taxed like a nonresident, so its non-US income stays off your future US return. The estate protection can survive even if the trust is later moved to the US for other reasons.

The five-year lookback is the condition that decides the plan. If your residency starting date falls within five years after you fund a foreign trust, US law can treat you as having made the transfer on your start date and tax the trust’s worldwide income to you for life. The conservative plan therefore funds the trust irrevocably more than five years before your residency starting date. Three more rules apply to the trust.

1. Fund the trust while you are still a nonresident, because funding a foreign trust after you are a US person can trigger the deemed-sale tax described above.
2. If US family members are beneficiaries, distribute income each year rather than letting it accumulate, because accumulated income paid out later carries an extra throwback tax and a compounding interest charge.
3. Keep the transfer a genuine gift, with no side understanding that you can take the assets back, or the trust can be pulled back into your US estate.

We co-counsel the drafting of these trusts. The five-year runway is the reason we start early, or use the deferral rules below to buy time.

The Estate and Gift Tax Shift: A Different Clock

Estate and gift tax run on a separate clock from income tax. US estate and gift tax turn on domicile, meaning the place where you live with no present intention of leaving, while income tax turns on the mechanical residency tests above. You can be a US income-tax resident, as a green-card holder or through the day count, before you are a US domiciliary, because domicile also requires the intent to stay indefinitely. The gap between the two dates is a planning window that comes once.

The difference in the numbers is large. As a non-domiciliary, the US taxes only your US-situs property at death, your US estate exemption is $60,000, and you have no lifetime gift exemption at all. As a US domiciliary, the US taxes your worldwide estate, with the full $15 million exemption for 2026. The top rate is 40% either way, so domicile status can change the tax on the same assets by millions of dollars.

The planning happens in the gap. While you are still a non-domiciliary, you can give US-company stock and other intangibles, and any non-US property, free of US gift tax, even though the same US stock would be taxed in your estate if you died holding it. Gifts of appreciated stock and the funding of family trusts belong in that period. Once you are domiciled, every gift above the $19,000 annual exclusion per recipient ($194,000 to a spouse who is not a US citizen) uses up part of your lifetime exemption. Gifts of US real estate or US tangible property during the window are taxed, so the window is for intangibles and not for the house. For the estate-tax picture on each side, see US estate tax for a non-resident alien and estate planning for non-US citizens.

The gift window runs on a different deadline from the five-year trust clock. The trust clock wants funding more than five years before your income-tax residency date. The gift window wants the gift completed before domicile attaches, which can come after your income-tax residency date. Both have to be run, and they can point to different dates.

Florida adds one more timing point. The steps that establish Florida domicile for its lack of a state income tax, such as buying a homestead and filing a declaration of domicile, are also evidence of US domicile for estate and gift tax, and they close the gift window. The gifts come first, and the Florida domicile checklist comes after.

Can You Push the Residency Date Out?

Sometimes the right step is to buy time. Two rules can push your start date out or keep a marginal year from counting as a residency year, and both matter most when you need runway for the five-year trust clock.

The first is the closer-connection exception. If you are in the US fewer than 183 actual days this year, keep a tax home abroad, and have a closer connection to another country, you stay a nonresident even though the day-count formula would otherwise reach you. You claim it on Form 8840. The second is a treaty tie-breaker, under which a person resident in two countries can be treated as a nonresident of the US under a US tax treaty, claimed on Form 8833.

The choice of immigration route also sets a future exit-tax clock. A green card starts a long-term-resident count, and once you have held the card in at least 8 of the last 15 years, giving it up can trigger the exit tax, including for a green-card holder who takes the treaty tie-breaker position described above. A non-immigrant or treaty route does not start that count, although the day count can still make you a worldwide taxpayer. Taking a green card "to be safe" when a treaty route would serve can create an exit tax you never needed to face. We run that count before anyone chooses a route. The exit-tax page covers the outbound side in full.

How We Work, and When We Co-Counsel

Pre-immigration planning involves several advisers, so we say plainly where our role sits. Screening when your US tax clock starts, running the separate domicile question, building the two-clock timeline, and the estate, gift and Florida-domicile planning are handled here. We co-counsel the deemed-sale and income-tax modeling, the controlled-foreign-corporation and foreign-fund cleanup, and the foreign-trust drafting with an international tax advisor, and qualified foreign counsel handles any foreign-country tax. We tell you up front which pieces your matter needs.

Our Florida practice meets this work on the estate and residency side. Florida has no state income tax and no estate tax, which is a real advantage only if the gifts and trust funding are sequenced correctly against the domicile clock. Most of the work runs by phone and video, which suits clients who are still abroad, including families relocating from Israel. The screen comes first, because it sets every deadline that follows. See the full international tax planning hub →

Frequently Asked Questions

Common Situations

The founder moving to Miami with a foreign company. A tech founder plans to move to Florida next year. She holds appreciated shares in her own foreign company and a personal portfolio. Her plan resets the portfolio basis with real sales before her start date, distributes the company’s accumulated earnings while she is still a nonresident so they reach her free of US tax rather than as taxable dividends later, and gives a block of US-listed stock to a family trust before she is domiciled, free of US gift tax. After domicile attaches, any gift above $19,000 per recipient would use up part of her lifetime exemption.

The investor-visa immigrant in the backlog. A family in a multi-year investor-visa queue uses the wait as the planning period. With residency still years away, there is time to fund a foreign trust more than five years before the start date, keeping that wealth outside the future US estate and income tax, and to reset basis and clean up foreign funds well before conditional residency begins.

The snowbird approaching the day count. A retiree who winters in Florida is approaching the substantial-presence threshold without intending to become a US taxpayer. Running the three-year day count and, where it fits, claiming the closer-connection exception on Form 8840 keeps him under 183 actual days and out of an accidental residency year, and the domicile analysis confirms his worldwide estate stays outside US estate tax.

Sources of Law

• 26 U.S.C. §7701(b)(1) to (b)(4) and (b)(6) (residency starting date; the 31-day and weighted 183-day count; the first-year election; up to 10 disregarded days; the treaty tie-breaker); §7701(b)(3)(B) (closer-connection exception, Form 8840); Form 8833 (treaty position). law.cornell.edu
• 26 U.S.C. §865(a) (residence-based sourcing of gain); §871(a)(2) (US-source capital gains of a nonresident present 183 days or more); §877A(h)(2) and Notice 2009-85 (market-value basis on the residency starting date applies for the exit tax only, and excludes US real property, so it is no general income-tax step-up); §7701(o) (economic-substance and step-transaction limits on a paper reset).
• 26 U.S.C. §897 and §1445 (FIRPTA, under which a foreign owner’s gain on US real estate is taxed as effectively connected income, with withholding on the sale).
• 26 U.S.C. §951A and related subpart F (controlled foreign corporations); §§1291 to 1298 (passive foreign investment companies); §679(a)(1), (a)(4), and (c) (five-year pre-immigration foreign-trust lookback and the US-beneficiary presumption); §684 (deemed sale on a US person’s transfer to a foreign trust); §§665 to 668 (throwback tax and interest charge on accumulated trust income).
• Treas. Reg. §20.0-1(b)(1) (estate-tax domicile) and §25.2501-1(b) (gift-tax domicile, same standard); 26 U.S.C. §2101 and §2102(b)(1) (non-resident estate tax and the $13,000 unified credit that shelters $60,000 of US situs, not inflation-indexed); §2103 to §2105 (US-situs property and exclusions); §2104(a) (US-company stock and US real estate are US-situs at death); §2501(a)(2) (a non-resident’s gifts of intangibles are outside US gift tax); §1015 (carryover basis on a lifetime gift). The 2026 figures are a $15,000,000 worldwide exemption, a $19,000 annual gift exclusion and $194,000 for gifts to a non-citizen spouse. (retrieved 2026-07-16)

The Window That Closes on Arrival

In my practice, the work that matters most for somebody moving here happens before they arrive, and most people call after they land.

A common question I hear is, "When exactly do I become a US taxpayer?" The answer usually comes sooner than people expect, and rules set the date rather than intention. A green-card holder starts on the day of the first landing, and a snowbird who spends 122 days here each year reaches the 183-day count in the third year.

I run the three-year day count before anything else, because every other deadline on this page is measured from the date it produces. Before that date I can still reset the cost of appreciated assets, restructure holdings that US rules tax heavily, and take gains while they are outside US tax. After it, none of those steps is available.

Practice pointer. Count the days before you book the flight. The residency start date can be managed, and a difference of a few weeks can move a dividend or a sale to the untaxed side of the date.

Avoid arriving with shares in foreign mutual funds that nobody has checked. An ordinary fund abroad can be a PFIC here, and the interest charge grows the longer the fund is held.

Kevin D. Klagge, Esq., admitted in Florida since 2012. Any case described is a decision of a court rather than a matter handled by this firm. General information rather than advice on your situation.

Updated on September 23, 2026. Reviewed by Kevin D. Klagge, Esq., Fla. Bar No. 99502. This article is general information about US law, not legal or tax advice, and does not create an attorney-client relationship. Pre-immigration planning is specialized; the deemed-sale and income-tax modeling, the foreign-company and foreign-fund cleanup, and the foreign-trust drafting are co-counseled with an international tax advisor, and foreign-country tax is handled by foreign counsel. Federal figures are adjusted periodically and may change. Your result depends on your specific facts.