Dual citizen investing in Interactive brokers

[cherry1]

I am new to investing and am currently thinking about joining Interactive brokers.
My situation is as follows:

- I am a dual citizen UK/US (US is my nationality on my PR in Japan)
- I hold permanent residence in Japan

From what i understand being an American in Japan somewhat limits me to what i can invest in.

I am contemplating setting up a portfolio for long-term investing (20 years), something like: 60% VOO S&P 500 / 40% BND bonds , if this is possible to do on Interactive brokers.

Does this seem worthwhile?
As an American what other investment options do I have?
And, would i be double-taxed by both Japan and America?

[captainspoke]

Sure use IB (about your only option).

For a 20yr 'window', (maybe you're about 40-45 now?) 60/40 seems too conservative. (Talk/ask about the value of a bond allocation in a portfolio and you'll get different answers.)

You may want to choose ETFs that pay lower dividends, but even the average (total market or VOO) is not that much. This will make less difference initially, when your investments are smaller, and a little more after you've accumulated a nest egg. Why? You'll need to report this as passive income here on your tax filing. Some folks would worry more about this than others.

No, you will not be double taxed (assuming you file and are current with the IRS). If you just accumulate and don't trade/sell, then it'll only be dividends. On the US side, with the FEIE, your taxable income is effectively zero, so up to the standard deduction in dividends will be tax free (more if you claim a spouse or dependents). If you strike it rich(!), you may eventually pay some tax (which you can claim against taxes due here, so it still not double tax), and the other option is to someday switch to the FTC, which also allows for some leveling of taxation.

The only other good option as a US citizen is if you had had an investment account set up there before you left (and at one of the brokers that would continue to serve you as an expat--not all of them do).

[FlamingWombat]

"so up to the standard deduction in dividends will be tax free..."

If possible, could you clarify this for me? "Me" being an American who started investing through IB last year and got a couple hundred USD in dividends for the first time (and will be dealing with the tax issues of them for the first time too obviously). If someone using FEIE and is married filing separately, they wouldn't pay tax on dividends unless it goes above the standard deduction of $12,550?

[Haystack]

I am new to investing and am currently thinking about joining Interactive brokers.
My situation is as follows:

- I am a dual citizen UK/US (US is my nationality on my PR in Japan)
- I hold permanent residence in Japan

From what i understand being an American in Japan somewhat limits me to what i can invest in.

I am contemplating setting up a portfolio for long-term investing (20 years), something like: 60% VOO S&P 500 / 40% BND bonds , if this is possible to do on Interactive brokers.

Does this seem worthwhile?
As an American what other investment options do I have?
And, would i be double-taxed by both Japan and America?

Though I cannot comment on American taxation, I can comment on IBKR and your porfollio.

1.IBKR is a great broker, fabulous rates on currency exchange and access to basically every world market.

2. VOO/BND is fine, but it`s concentrated too much in large caps.

VTI/BNB would be better. Personally I would go VT/BNDW

3. 60/40 is too conservatives with a 20 year timeline. I would consider 80/20.

[captainspoke]

"so up to the standard deduction in dividends will be tax free..."

If possible, could you clarify this for me? "Me" being an American who started investing through IB last year and got a couple hundred USD in dividends for the first time (and will be dealing with the tax issues of them for the first time too obviously). If someone using FEIE and is married filing separately, they wouldn't pay tax on dividends unless it goes above the standard deduction of $12,550?

Yes, FEIE will bring your earned income to zero, and the standard deduction means that unearned/passive income like dividends can be that much before being taxed.

Separately, I've read the the tax free level for qualified dividends is much higher before they are subject to tax ($40-50k??), but I don't have any concrete info on that. So google qualified dividends, and look at your year-end tax reporting paperwork--dividends and qualified dividends get separate lines there.

[FlamingWombat]

Thanks for the reply. For some reason I was thinking that unearned income like dividends would be taxed regardless of their amount or of the amount of the standard deduction. I guess that means I will only be paying the tax on the dividends on the Japan end.

[runmanTX]

I'm American and currently investing about 90% in VTI and 10% in BND (ETF bond fund). Am in the accumulation phase and planning to retire in 12 years or so.
I don't know much about Interactive Brokers but if it's possible to open a US brokerage account I would recommend that. I've got an American bank account and address so I was able to do this.

[NakaZatoHamlet]

There is information spread here and there throughout the boards, but I'm having trouble getting it all clear in my head. Could someone point to the key pros and cons of using International Brokers versus a Japan-based firm (e.g. Nomura/Rakuten/SBI).

In my particular case – I’m a UK expat with PR, many years of Japanese pension contributions, and I'm presently setting up a NISA and IDECO. I’m not sure I will retire in Japan. I don't read Japanese well, but can get by. The above question is related to doing some additional entry-level investing beyond these vehicles.

Thanks

[RetireJapan]

Could someone point to the key pros and cons of using International Brokers versus a Japan-based firm (e.g. Nomura/Rakuten/SBI).

For a non-US citizen (US citizens basically can't use Japanese brokers):

pros of IB:
-English language interface
-access to basically all global markets
-access to margin trading/options/etc. (don't recommend this)
-can keep the account if/when you leave Japan

cons of IB:
-more involved tax reporting compared to J-broker, who will do all that for you
-added expense/friction of sending money to IB

Anyone else? I am not currently using IB, as I am not planning to leave Japan, so this is just my impression of it...

[NakaZatoHamlet]

Thanks,
I think from other posts that there is a danger of paying more tax than necessary if using IB. Perhaps there is double or unnecessary taxation on US or European investments; is that true? If so, is there an approach to mitigate against it?
(Planning to invest in a handful of EFTs/mutual funds)?