Tax Guide for Norwegian Expats in the U.S.
Many questions arise for Norwegian expats in America regarding taxes. For example, how much income tax will you owe when you move to the United States? What documents do you have to submit? Where do you stand with the Internal Revenue Service (IRS) concerning your Norwegian assets? Here are the most critical U.S. tax concerns that Norwegian expats should be aware of before moving there:
1. When am I considered a U.S. tax resident for tax purposes (i.e., how many days spent in the U.S.)?
The substantial presence test determines whether or not you are a tax resident of the United States for the entire calendar year. A physical presence in the United States is required to pass this test:
- 31 days during the current year, and
- 183 days during the 3-year period that includes the current year and the two years immediately before that, counting:
- All the days you were present in the current year, and
- 1/3 of the days you were present in the first year before the current year, and
- 1/6 of the days you were present in the second year before the current year.
2. Do I have to declare my worldwide income (my foreign earned and unearned income)?
To be subject to the exact reporting requirements as a U.S. citizen, you must pass the Substantial Presence test and declare all of your international income.
3. Do I have to declare my non-US financial accounts on FBAR / Form 8938?
To become a U.S. citizen, you must pass the Substantial Presence requirement, which means you must reveal your non-US financial accounts to the IRS on all the necessary forms like Form 8938.
4. Under what conditions can I stop having to file U.S. tax returns?
Once you no longer reside in the United States and do not receive any income from sources in the United States, you may no longer be required to file a U.S. tax return.
5. If I have extra income (such as dividends or rental) in Norway, how should I pay taxes, in the U.S. or Norway?
If you meet the requirements of the Substantial Presence Test, you are required to pay tax in the United States on all of your international income, including unearned income.
Please keep in mind that you may still be obligated to pay taxes in Norway. There are a variety of approaches that can be used to prevent double taxation. The most frequent technique is to claim a Foreign Tax Credit on your U.S. tax return for tax paid in Norway that you have already paid in that country. Some nations that have signed a Tax Treaty with the United States may accept Form 6166—Certification of U.S. Tax Residency and grant a tax exemption in exchange.
6. I no longer live in the U.S. but have a pension from when I worked previously. Is this taxable?
Pensions are often comprised of earned income that has not previously been taxed and has not previously been taxed earned income. When you get pension distributions, the Internal Revenue Service will tax them in the same manner as earned income.
7. I still own a home in the U.S. - if I sell it, do I have to file a U.S. tax return? If I rent it, do I have to file a U.S. tax return?
Whenever you sell a piece of real estate in the United States, you must file a federal and state tax return to disclose the transaction. If you rent out your property in the United States, you must file an annual nonresident tax return (Form 1040NR) to report any gains or losses from rental activities.
In addition, unless the property is located in a tax-free state such as Texas, a nonresident state return is required each year.
Even if you incur a loss on an annual basis, you must file a report. Furthermore, if you decide to sell your property, any accumulated losses (if any) will be deducted from the sales proceeds. These losses will not be recouped until they are reported every year. If the property is idle (i.e., there is no rental activity), there is no need to file any reports.
8. Does the U.S. have a tax treaty with Norway?
There is a U.S. Norway tax treaty in place that reduces double taxation and limited required tax withholding. It is necessary to notify the payor of your income (the withholding agent) of your foreign status to be eligible to benefit from a tax treaty that exists between the United States and your nation.
Generally, you do this by filing Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding or W-8BEN-E, Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities) or Form 8233, Exemption from Withholding on Compensation for Independent (& Certain Dependent) Personal Service of a Nonresident Alien Individual with the withholding agent.
Form W-8BEN or W-8BEN-E, in which the foreign person asserts that it is entitled to a reduced rate of withholding under an income tax treaty, is valid only if the foreign person provides an IRS-issued Taxpayer Identification Number (TIN) (except for specific marketable securities) and certifies that the foreign person meets the following requirements:
- They are a resident of a treaty country;
- They are the beneficial owner of the income;
- If an entity derives the income within the meaning of Section 894 of the Internal Revenue Code (it is not fiscally transparent); and
- Meets any limitation on benefits provision contained in the treaty, if applicable.
The next time you’re considering moving to the United States, don’t forget about taxes.