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Will I Be Able to Collect Social Security Retirement Benefits If I Renounce My US Citizenship?

Will I Be Able to Collect Social Security Retirement Benefits If I Renounce My US Citizenship?

Are you considering renouncing your US Citizenship? Are you curious as to how this will impact your eligibility to receive Social Security retirement benefits?

Record numbers of US Citizens living overseas as US Expats are renouncing their US Citizenship to avoid being taxed by a country in which they are no longer living.  The act of giving up your status as a US Citizen requires much thought and planning.  One of the biggest considerations for some who are thinking about expatriating from the United States is whether or not they will continue to be eligible to receive Social Security retirement benefits.  Generally speaking, you will be allowed to receive Social Security benefits as an expatriate.  There are a few factors to consider, though.

Social Security retirement benefits are earned by working in the United States and making Social Security contributions; they are not automatically earned through US Citizenship.

Just because you are a US Citizen does not mean that you are automatically eligible to receive Social Security benefits.  You must be legally employed and make Social Security contributions through your employment.  Most of the time, you must work a legal job and pay into the US Social Security program for ten years in order to be eligible for benefits. If non-citizens or former citizens are employed in the United States and they are making Social Security contributions, they are as eligible as citizens to receive benefits. You must be aware, however, that – as a Non-US Citizen receiving Social Security payments, you may be facing higher rate of taxation depending on the country in which you live.

There are a variety of factors which will affect the status of your residency with the United States. You will either be regarded as a resident or a non-resident.

American Citizens who make the decision to renounce their US Citizenship are regarded by the United States as all other aliens, or Non-US Citizens. You will fall under the classification of a non-resident alien or you will be regarded as a resident alien. You will have resident alien status if you maintain official permanent residency. If you do not have a permanent residency status, you must be able to declare ‘substantial presence’ inside the US. In most cases, a substantial presence is obtained if you are in the US for 31 days out of a given year or you are in the US for a period of six months out of a time span of three years. Meeting the conditions of the substantial presence guidelines may not be enough to be considered a resident alien in the event that the government decides that you maintain more ties to another country than you do to the United States.

Whether or not your Social Security benefits are taxed will depend on two things: Whether or not you’re earning other income and where in the world you are residing.

Depending on where in the world you live, if your sole income is from your Social Security payments, you will not be taxed on that income. That is unless you reside in a country in which there is no tax treaty. If you live in a foreign country in which an active tax treaty does not limit the amount you will be taxed, you will be subject to a non-resident alien tax rate of 25.5% of your Social Security distributions. If you are living in one of the following countries, your Social Security benefits will not be taxed:

  • Canada
  • Egypt
  • Germany
  • Ireland
  • Israel
  • Italy
  • Japan
  • Romania
  • United Kingdom

Residents of Switzerland will only be subject to a tax rate of 15%. If you are residing in India and you are working a US Government job, you won’t be taxed on any of your Social Security payments.

You may be able to receive the U.S. Social Security benefits even if you have not completed required 10 years of employment in the United States - provided that you have contributed to the Social Security system in one of the countries that has the Social Security Totalization Agreement with the United States.

If you have some U.S. coverage but not enough to qualify for benefits, SSA will count periods of coverage that you have earned under the Social Security program of an agreement country. In the same way, a foreign country party to an agreement with the United States will take into account your coverage under the U.S. program if it is needed to qualify for that country's Social Security benefits.

There are certain countries to which the Social Security Administration is prohibited from sending benefits. Your benefits will accumulate while you are living there, and you can get them under certain conditions.

If you are living in Retirees who move to Cuba or North Korea cannot receive any checks while they live in those countries. However, they can get the withheld checks if they go to a country where paychecks can be sent. If you live in Cambodia, Vietnam, or areas that were parts of the former Soviet Union (other than Armenia, Estonia, Latvia, Lithuania, and Russia) you cannot get the checks sent to you. Retirees living in those countries may be able to receive checks under certain conditions, such as appearing in person at the U.S. embassy each month, to receive benefits.

Ines Zemelman, EA
Founder of TFX