Rep. Darin LaHood, R-Ill., introduced legislation Tuesday to allow Americans living overseas to elect to be treated as a non-resident American and be subject to U.S. tax only on U.S.-sourced income and gains — including distributions from retirement plans.
The Residence-Based Taxation for Americans Abroad Act would implement a residence-based taxation system for U.S. citizens living overseas.
"Under this new tax regime, an electing taxpayer would be subject to U.S. tax only on U.S.-sourced income and gains (such as income from ownership in a U.S. business), distributions from U.S. retirement and deferred compensation plans, income from assets physically located in the U.S. (such as rent from real-estate investments), and other U.S.-sourced income or gains," LaHood said in a statement.
The bill requires the non-resident American to live abroad for at least three years.
The United States "is the only major country that uses citizenship-based taxation, a system that levies taxes on individuals regardless of where they live or whether they earn income in the United States," LaHood said.
“This is a non-partisan issue that impacts U.S. citizens with roots in districts across the country. In today’s world, Americans choose to live and work abroad for a host of reasons, and that does not mean that they should be subject to more onerous tax and compliance burdens,” he said.
LaHood said the issue was a priority for President-elect Donald Trump on the campaign trail, citing a Wall Street Journal interview in which Trump said he supported “ending the double taxation of overseas Americans.”
