maneo wrote:When I checked with tax preparers and a tax attorney they confirmed that no tax will be owed on CPF funds cashed out or paid out as retirement.
Right. The general consensus seems to be:
1. Every year you have to include all your employer's CPF contributions in your gross income. Per an old (but still apparently most current) IRS ruling those contributions are, unfortunately, not excludable under the Foreign Earned Income Exclusion. So the employer's contributions are taxable on the inbound. (Of course your contributions are part of your income, too, but those appear to be excludable via the FEIE since they come out of your paycheck.)
2. You report the interest paid on your CPF funds each year on Schedule B, and that's taxable.
3. THEN, upon withdrawal, no tax is owed. The U.S. has already had the opportunity to tax the incoming funds, and you've also paid tax on the interest along the way.
This is still pretty good, though. For a lot of people, maybe most people, the employer's contributions slide under their personal exemptions and standard deductions, and they're spreading out the interest income in a similar way. Taxable doesn't necessarily mean taxed -- there's still a 0% tax bracket in the mix.
Think of it as being the same as if you withdrew the full balance of a savings account from a bank.
Yes, it's quite like that. It's "just another account" from the U.S. point of view. It at least wouldn't hurt
to report your CPF account via FinCEN Form 114 and/or IRS Form 8938, if/as applicable, although as I read it you don't have to.
One caveat: I'm describing ordinary CPF fund allocations. If you steer any of your CPF funds into investment products, such as unit trusts (i.e. non-U.S. mutual funds), then you could run into PFIC and/or foreign trust rules. Those subaccounts are more complicated at least in terms of paperwork, so I don't recommend that. I don't consider that a loss since I think those vehicles are quite poor in comparison to U.S. vehicles, and I'd much rather take the 4+ percent guaranteed, simple yield.
sundaymorningstaple wrote:BBC & I are at differing viewpoints on this but I'll let everybody know what happens as I'm closer to retirement than most (7 or 8 more years at most) I'm already 68.
I'm a bit concerned, that's all. You'll start collecting U.S. Social Security benefits no later than age 70, less than two years from now, so you should have a WEP answer fairly soon. I haven't been able to find any reports bearing on that question yet, probably because there aren't too many U.S. Social Security retirement benefit recipients who also have CPF. Yes, please let us know what you discover.
One interesting question is whether you can do anything with MediShield Life from a U.S. tax point of view. Probably not, but I haven't looked at it carefully enough yet. If you're doing all the above with regard to CPF tax treatment on the U.S. side then Medisave is treated the same way -- but that also means (as I understand it) you can still count the dollars you spent on medical expenses even if some/all of those dollars came from your Medisave subaccount. Meaning, if you qualify, you can take the itemized deduction for medical expenses on your U.S. tax return. Medisave is still money -- just another ordinary account from the U.S. point of view -- so I don't see why that wouldn't work.