Investment Coordination for Expats in Miami

No, and the second half of that question deserves a blunt answer before the first. The Reed Corporation is a CPA and tax firm. The firm is not a registered investment adviser. We do not sell securities. We do not manage portfolios, and we do not give advice on which fund to buy or when to sell one. A person who does that work for you holds a license we do not hold, and it should stay that way. What the firm does offer under the heading investment coordination for expats in Miami is the tax half of your investment life, handled in step with the advisor or private banker you already use.

The split matters more than it sounds. Your advisor picks the holdings and answers for the performance. We price the tax consequence of those holdings on a return that, for a United States citizen living abroad, still reports worldwide income on Form 1040 no matter which country stamps the passport. Those two jobs pull against each other constantly. A rebalance that reads as housekeeping on a quarterly performance report can throw off a six figure short term gain in the same year you were planning to sell a rental property. Nobody catches that collision unless the tax person is in the conversation before the trade settles rather than four months later.

So what does the work actually contain? Four pieces, mostly. Cost basis tracking, so every lot carries a dollar figure behind it that survives a currency conversion and a change of broker. Gain and loss timing, so realized results land in the year that costs the least. Net investment income tax planning, which runs through Form 8960 and catches people who assumed the foreign earned income exclusion had already protected them. Retirement account planning across the 401(k) and the IRA you left behind in the States, where Publication 590-A sets contribution rules that do not bend for the fact that you now live in Lisbon.

An example shows why the timing piece earns its fee. A client moved to Portugal in March 2026 and expects roughly 90,000 dollars of wages, nearly all of it covered by the foreign earned income exclusion. She holds a fund position carrying a 40,000 dollar unrealized long term gain and wants to sell it, because her taxable income after the exclusion looks like about 22,000 dollars, which she reads as the zero percent long term capital gain bracket. It is not. The exclusion carries a stacking rule, so tax on everything else is figured at the rates that would have applied if the excluded wages were still sitting in the base. Her gain stacks on top of 90,000 dollars rather than on top of 22,000 dollars, and 15 percent of 40,000 dollars is 6,000 dollars of federal tax she never budgeted. Publication 17 walks the ordering, and the sale itself still reports on Form 8949 and Schedule D either way.

That is the mistake we see most often, so let us name it plainly. Expats read the exclusion as though it lowered their bracket. It does not lower the bracket. It pulls income out of the base while leaving the rate ladder exactly where it stood. A second version of the same wrong assumption shows up at the net investment income tax, where the modified adjusted gross income figure adds those excluded wages back before the 3.8 percent threshold is even tested. One bad instinct, two expensive rules, and both of them surface in the year a client finally sells something.

None of this requires us to hold an opinion about her fund, and we never do. We tell her what selling costs in 2026 against what it costs in 2027, then she and her licensed advisor decide. That line stays bright on purpose. We would rather decline a question than answer it from outside our lane, and clients tend to trust the tax answer more because of it.

Most people reach this service through an ordinary door. Clean bookkeeping comes first, because a basis schedule is only as good as the records underneath it. Return preparation follows through individual tax return work, and the multi year decisions get made in planning sessions. As foreign custodians keep widening what they hand to United States authorities, the expat who builds a clean basis and timing record this year is the one who files the next decade of returns without reconstructing anything from memory.

Basis is where expat portfolios quietly break, and it breaks for a reason that has nothing to do with sloppiness. A domestic broker carries your basis for you and prints it on a year end statement. A foreign broker does not. It reports in euros or pounds, it follows local rules for what a gain even means, and nothing obliges it to track anything the United States tax code cares about. So the moment part of a portfolio sits offshore, basis becomes your record to keep, and by extension ours.

The translation rule is the first thing people get wrong. Basis is fixed in dollars at the exchange rate on the date you bought. Proceeds are fixed in dollars at the rate on the date you sold. Those are two different dates and two different rates, which means a position can go absolutely nowhere in local currency and still throw a taxable dollar gain, or a deductible dollar loss. Publication 551 covers how basis is set and adjusted, and Publication 550 handles the investment income side that sits on top of it.

Here is the arithmetic on a real pattern. You bought 400 shares of a European industrial in 2019 at 60 euros a share, when the euro traded near 1.10 dollars. Dollar basis is about 26,400 dollars. You sell in 2026 at 62 euros a share with the euro near 1.18 dollars, so proceeds run about 29,264 dollars. In euro terms you cleared 800 euros on a 24,000 euro position, which is almost nothing. In dollar terms you have a long term capital gain of roughly 2,864 dollars, and currency movement produced most of it. That gain lands on Form 8949, carries to Schedule D, and counts as net investment income for Form 8960 purposes. Run the same math on a losing year and the currency can erase a loss you thought you had banked.

Multiple brokers add a second problem. Lot identification only works if somebody chose the lot at the time of sale and can prove it. Absent that instruction, first in first out applies, and first in first out is almost never the lot you wanted to sell. We keep a running basis schedule per lot, per account, in dollars, tied to trade confirmations rather than to a broker summary, so that when you tell your advisor to sell the 2019 tranche instead of the 2015 tranche, the paperwork actually supports the choice you made. Wash sale tracking has the same shape. The rule looks across every account you control, including the offshore one your custodian will never cross reference against your domestic account.

The common mistake is treating a foreign broker’s annual statement as finished work. Clients hand us a document that shows a 4,100 euro gain and ask us to convert it at the year end rate. That number is a local tax figure computed under local rules, translated at the wrong date, and it is wrong twice over. We rebuild from the underlying trades. It is slower in year one and nearly free every year after, because the schedule already exists and only needs the current year appended to it.

The other habit worth breaking early is discarding old confirmations. A 2011 purchase confirmation you deleted during a move is a 2027 problem, and the fallback position when basis cannot be proved is a basis of zero. The IRS recordkeeping guidance is plain that the burden of proving basis sits with the taxpayer, not with the custodian who happens to hold the shares this decade.

Practically, this rides alongside your ordinary compliance work. The schedule feeds individual tax return preparation every spring, and the reconciliation habits behind it come out of the same discipline as monthly bookkeeping. Build the lot record while you can still find the confirmations, and every sale you make for the rest of your life abroad becomes a five minute calculation rather than a two week archaeology project.

Yes, and this is the rule that surprises clients hardest, because it breaks the mental model almost every expat carries. The working assumption goes like this. I pay tax in Spain, the treaty and the foreign tax credit sort out the overlap, therefore I do not pay twice. That holds up reasonably well for regular income tax. It collapses entirely at the net investment income tax, and the reason is structural rather than accidental.

The 3.8 percent tax sits in a different chapter of the code than the income tax the foreign tax credit was built to offset. The credit reduces your regular tax. It does not reduce this one. So an expat paying a healthy rate in a high tax European country can still write a check to the United States Treasury for 3.8 percent of investment income that was already taxed abroad, with no credit available against it. The computation runs on Form 8960, and the income categories it sweeps in are the ones described across Publication 550, meaning interest and dividends, capital gains, rents and royalties, plus passive business income.

The threshold mechanics matter as much as the rate. The tax applies to 3.8 percent of the lesser of two figures. Figure one is your net investment income. Figure two is the amount by which your modified adjusted gross income exceeds the filing status threshold, which is 200,000 dollars for a single filer and 250,000 dollars for a married couple filing jointly. Take a single expat with 240,000 dollars of modified adjusted gross income, of which 60,000 dollars is dividends and realized gains. Net investment income is 60,000 dollars. The excess over the threshold is 40,000 dollars. The tax is 3.8 percent of the smaller number, so 3.8 percent of 40,000 dollars, which is 1,520 dollars. Add one more sale in December and that figure climbs, because the excess grows dollar for dollar until it passes the investment income total.

Now the trap specific to expats. Modified adjusted gross income for this purpose adds back foreign earned income that the exclusion removed. A client excluding 120,000 dollars of salary and reporting 90,000 dollars of adjusted gross income does not have 90,000 dollars of modified adjusted gross income for this test. He has roughly 210,000 dollars, he is over the single filer threshold he was certain he had cleared, and every dividend he collects now carries an extra 3.8 percent. That is the common mistake, and it costs real money because it is discovered in April rather than planned for in October.

Coordination is what makes the number movable. We cannot tell you which security to hold, but we can tell your advisor which year has room underneath the threshold and which year does not, so that harvesting decisions get made against a live projection rather than a guess. Loss harvesting inside the same year reduces net investment income directly. Spreading a large disposition across two tax years can hold both years nearer the line. Where a position is going to a charity anyway, giving the appreciated shares rather than selling and donating cash keeps the gain out of the calculation altogether, subject to the itemizing rules on Schedule A.

Cash flow needs its own plan, because nothing withholds this tax for you. A dividend arrives whole and the liability shows up at filing. Expats who wait on it collect an underpayment penalty on top of the tax, which is why quarterly payments through Form 1040-ES belong in the plan, with Publication 505 setting out how the safe harbors work when income swings year to year.

This is exactly the ground that investment coordination for expats in Miami is meant to cover, and it fits naturally beside tax strategy consulting and the annual individual tax return file. Model the threshold in the fall, while December still has options in it, and the 3.8 percent stops being a surprise line item and becomes a number you chose.

They keep existing and they keep growing. Almost every rule that governed them at home follows you across the ocean unchanged. What changes is the raw material feeding them, because the foreign earned income exclusion quietly removes the one thing an IRA contribution requires. That single interaction generates more cleanup work than anything else we see in expat retirement files.

Start with the contribution side. An IRA contribution needs taxable compensation. Wages you excluded are not taxable compensation for this purpose. So an expat earning 110,000 dollars in Dubai and excluding all of it has zero eligible compensation and cannot fund an IRA at all, Roth or traditional. Publication 590-A spells out the compensation definition, and the penalty for getting it wrong is not theoretical. A 7,000 dollar Roth contribution made in a fully excluded year is a 7,000 dollar excess contribution carrying a 6 percent excise tax, or 420 dollars, charged every single year until the money is withdrawn and the earnings pulled out with it. Leave it alone for four years and you have paid 1,680 dollars for the privilege of a contribution you were never allowed to make.

That is the common mistake, and it usually arrives with good intentions attached. Someone reads that the exclusion saves tax, sets up an automatic Roth transfer, and never revisits it after the move. The fix is real but it is not free. Partial exclusion changes the answer, which is where planning enters. An expat earning 160,000 dollars who excludes roughly 130,000 dollars still has taxable compensation left over the exclusion cap, and that remainder can support a contribution. Choosing the foreign tax credit rather than the exclusion, where the local tax rate makes that sensible, restores compensation entirely. Neither choice is automatic and both bind for future years in ways worth thinking through before filing.

The distribution side is simpler mechanically and harder emotionally. A 401(k) or IRA distribution is United States source income to a citizen wherever they live. It arrives on Form 1099-R, it reports on Form 1040, and if you are under 59 and a half the 10 percent additional tax applies exactly as it would in Coral Gables. Publication 590-B covers distributions and required minimum distributions, which do not pause because you changed continents. The harder part is the country you live in, which may tax that distribution under its own rules and may not respect the Roth wrapper at all. Several countries treat a Roth withdrawal as ordinary income because their law never contemplated the account type. Treaty relief sometimes exists and sometimes does not, and that answer has to be checked country by country rather than assumed.

Self employed expats have a wider set of choices, because self employment income earned abroad can still support a plan even when wages could not. Publication 560 lays out the small business plan options, and Publication 571 handles 403(b) accounts for anyone who taught or worked in the nonprofit world before leaving. The interaction with the exclusion still applies, so the plan needs to be sized against the income that survives it rather than gross billings.

Keeping a Florida domicile helps on the back end. Florida imposes no personal income tax, so a distribution taken while domiciled in Miami carries a federal layer and nothing at the state level, unlike a filer who kept a high tax state domicile and never cut the tie. That single fact makes the sequencing of withdrawals worth real planning attention rather than a shrug.

We run this alongside tax strategy consulting and the ordinary 1040 preparation file, and we run it with your own advisor rather than around him. Set the contribution question correctly in the first year abroad and the account compounds untouched for twenty years, which is the whole point of having built it.

The working arrangement is deliberately narrow. Your advisor owns the portfolio and every decision inside it. We own the tax consequence and the record that proves it. The two of us talk before the trades rather than after, and the client sits in the middle deciding. In practice that means a short call in October, a projection your advisor can see, and a written note about which realizations fit this year and which ones should wait. We do not place trades and we do not hold custody. The firm carries no investment adviser registration, which is precisely why the tax opinion stays clean.

Florida is the part clients undervalue until they run the numbers. Florida imposes no personal income tax, so a Miami domiciled expat carries a federal layer and no state layer on dividends and realized capital gains. The Florida Department of Revenue collects sales and reemployment tax, not income tax, so there is no state return waiting for your brokerage activity. Unlike a filer who kept a New York domicile after moving abroad, a Miami filer has one taxing authority to answer to on a realized gain rather than two.

Put a number on it. Take a 150,000 dollar long term capital gain realized in 2026 by a single filer whose other income already sits above the threshold. Federal long term rate at 15 percent is 22,500 dollars. Net investment income tax at 3.8 percent adds 5,700 dollars, computed on Form 8960, and the gain itself reports through Form 8949 onto Schedule D. Total federal cost is 28,200 dollars. Florida adds zero. That same gain for someone who never cut a high tax state domicile could carry several thousand dollars more, and nothing about living in Bangkok changes it, because domicile follows intent rather than distance.

Which brings the common mistake into view. Moving abroad does not sever a state domicile by itself. We meet expats who left a high tax state for Singapore, kept the old driver license and the old voter registration, and assumed the ocean did the work. It did not. Their former state still considers them domiciled, and it will say so in writing. Establishing Florida domicile is a set of deliberate acts, including a Florida license, a Florida voter registration, a declaration of domicile filed with the county, and a genuine severing of ties to the state you left. Do it properly on the way out, keep the paperwork, and the position holds. Do it casually and you will defend it years later with nothing but a mailing address.

The record keeping side is where the two threads meet. State domicile fights and federal basis questions are both won with contemporaneous documents rather than recollection, which is why the recordkeeping standards the IRS publishes are worth reading even though they were written with businesses in mind. No return is beyond an audit, and the file that survives one is the file that was built the year the transaction happened. Keeping copies of prior returns and pulling an occasional account transcript costs an hour a year and settles arguments that would otherwise take months.

Clients who want this handled end to end usually pair ongoing bookkeeping with tax strategy consulting, then bring their advisor into the annual planning call. If that sounds like the arrangement you need, request a consultation and we will map the domicile file and the basis schedule together in the first session.

The value of investment coordination for expats in Miami is not a clever trick. It is that somebody keeps the tax picture current while you are eight time zones away thinking about other things. Set the domicile properly, keep the basis honest, and the next ten years of returns write themselves off a record you already built.