Please find an excerpt from our September 2025 Newsletter below.

US Taxes and Social Security

I spend a lot of space writing about US taxes in the newsletter, this time, just a short section on a few practical matters.

Are you a US citizen or Green Card holder living in Switzerland and do you have a Second and/or Third Pillar? If the answer is 'yes', have you been tracking your US tax basis? This means, how much of the current value in the account has already been taxed in the United States, since all of these accounts are “tax deferred” in Switzerland. Tracking your US tax basis at least annually is a critical element in avoiding double taxation. And, if like most American taxpayers, you report your contributions, your employer contributions, and earnings as income each year, then the only way to avoid partially or completely double taxation is to take the 2nd Pillar as a lump sum and potentially claim a Swiss tax refund on the withholding tax on the lump sum (only available if you leave Switzerland).

If you or your tax accountant (we know that Kristen and the team at KLR are doing this for many of you, thank you!) are not tracking your tax basis, please download a template to help you from our site, and let us know if you need any help.

Another tax planning area we see popping up more and more is our clients forming a non-US entity or investing a significant amount (over 20% ownership) in a non-US entity, particularly start ups. If you have done this recently or are planning to, please make sure you have a discussion with your tax firm and/or us BEFORE you do this, if possible. The reporting and tax planning implications are important and there are some critical things you will want to know about things like the form 5471 and how you may be able to avoid this using a “check the box” election. You will also want to understand what the GILTI tax and CFC (Controlled Foreign Corporation) rules are. These rules are complex and an area that even a lot of CPAs and tax preparers are not familiar with. It is worth doing research before starting the entity!

We have had a couple of clients recently ask why their “projected benefits” at retirement age on their latest social security statement went down from the year prior. The answer is simple: The annual COLA (Cost of living adjustment) that applies to your benefits dropped from 3.2% in 2024 to 2.5% for 2025. The most recent COLA amount changes the estimated inflation rate on your benefits and so you did not “lose” anything, it is just that your projected future increases went up by a smaller amount than the year before. Since SSA (The Social Security Administration) applies COLA each year to the estimate, a smaller COLA directly reduces the projected benefit at age 70.

While I am sure that I will talk in more depth about social security in the future, I fully expect that the program will continue to pay out most of its expected benefits well into the future. Eventually Congress will have to fix the program’s funding by using a variety of methods such as increased taxes on income for workers, increased taxes on social security for retirees, smaller COLAs and decreasing the amount of time spent in retirement (increasing the retirement age is the more popular alternative to achieving this last point). Social Security is a popular program and provides a base level of income in retirement even for a large part of the “1%” of highest earners.

Our clients find our newsletters to be a valuable part of working with White Lighthouse.
Samples from our previous newsletters can be found below.