Filing your American taxes while being a Dutch tax resident – 401K and IRA reporting (2024)

• Arnold Waal
• 3 February 2024

Filing your American taxes while being a Dutch resident tax payer. The 401K and IRA reporting, how is that done?

Filing your American taxes while being a Dutch tax resident – 401K and IRA reporting

You are a Dutch tax resident when your central point of life is in the Netherlands. The moment you move your central point to the Netherlands, you migrate. Then you file for that year the Dutch migration income tax return. The following years you file a resident tax return.

In the resident tax return you report your world wide assets.

Reporting your world wide assets is done in Box 3

We maintain a boxing system to keep it simple. Not a very successful approach, as the taxation is still not simple.

In Box 3 is reported your world wide assets. The cash in the bank is taxed at an assumed yield of 0,01% (2024) at a tax rate of 36%. That is doable. What is less doable is the taxation on investments. Basically everything other than cash in the bank is an investment. The assumed yield is 6,17% (2024) taxed at 36% tax.

Debts indeed should reduce the tax burden. The value of the debts are assumed to costs you 2,28% at the tax rate of 36% this reduces your Box 3 burden. If you have more debts than assets, you will not receive a refund.

How fits the 401K and IRA in Box 3?

Indeed, not. The 401K and the IRA is not part of Box 3. That should bring you a joyful feeling. However, the 401K and the IRA are part of Box 1. That should make your joyful feeling disappear.

The result is that the value of the 401K or the IRA is not taxed in Box 3 at the assumed yield of 6,17% times 36% tax. The moment money is taken out by you from the 401K or IRA while you are a Dutch tax resident, the amount is taxed in Box 1.

We can only assume you have already a taxable income in Box 1. If that income exceeds roughly EUR 75.000, the amount taken out is taxed at 49,5% income tax. Be careful how you plan your 401K or IRA benefits taken out.

Does the Box 1 taxation apply to every pension value?

Indeed, every true pension is not taxed in Box 3, but in Box 1. The contributions made to a foreign pension is not tax deductible. The exception is for a limited period of time while you hold the 30% ruling, only if apply up front for that exception.

The pension needs to be a true pension. Some have the opinion that a certain investment fund is their pension fund and should not be taxed in Box 3. A pension fund is a fund where the employer during employment made contributions to. You cannot touch this pension fund. Only if you reach the agreed upon pension age you start receiving benefits. That is what we refer to as a true pension.

The moment you are in control of your pension fund to the extent that you can make changes in the investments yourself, or payout. That is for Dutch tax purposes a Box 3 taxable investment fund. The moment you disagree, we suggest to ask the upfront opinion of the Dutch tax office.

Is there a point in filing the Dutch tax return if we also pay US tax?

That we do know and the answer is YES. Before you are able to file your US tax return, you need to have filed your Dutch tax return. The Dutch tax return is the basis on which the US tax return can be processed.

As we are aware of this fact and that you have a mid April deadline, we offer an early service. Early in the sense that the software that enables us to process your Dutch return is ready early February. Hence early February we can process your Dutch tax return. The moment you have provided us all we need, maximum of three working days it takes to turn around the income tax return.

Feel free to connect with us. Our 2024 rate is EUR 430 incl VAT including tax partner for a regular income tax return. An entrepreneurs income tax return is charged at EUR 590 excluding VAT including tax partner. Please connect with us via [email protected]

IamExpat webinar filing your American taxes

February 27 at 19.00 hours BNC tax and Tax is Exciting organize via the IamExpat platform a webinar about the US Dutch tax combination. Feel free to join us. We do appreciate that very much !

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