Year-End Tax Planning for EB-5 Investors: What Need to Know

As 2025 comes to a close, EB-5 investors should begin preparing not just for the next immigration milestone, but also for the U.S. tax implications that often come with it. Becoming a U.S. lawful permanent resident can significantly change how and when you are taxed, especially if you hold foreign assets, overseas income, or business interests abroad.

With proper planning before the tax season, many common tax surprises can be avoided. Below are the key areas EB-5 investors should understand as they approach the 2025 filing season.

When Does U.S. Worldwide Taxation Begins?

One of the most misunderstood issues for EB-5 investors is when U.S. tax residency actually starts.

In most cases, U.S. worldwide taxation begins when an investor enters the U.S. as a conditional permanent resident, not when the I-526E petition is approved. From that point forward, the IRS generally expects you to report global income, including:

• Foreign rental income

• Dividends and interest from overseas accounts

• Business income from non-U.S. companies

• Capital gains from foreign investments

Because immigration timelines and tax residency rules do not always align perfectly, coordinating early with a cross-border tax advisor is critical. Strategic timing, foreign tax credits, and treaty planning can help reduce double taxation during the transition.

Foreign Asset and Bank Account Reporting: A Common Pitfall

Many EB-5 investors maintain bank accounts or investments outside the U.S., which can trigger strict reporting requirements, even if no U.S. tax is ultimately owed.

Common filings include:

• FBAR (FinCEN Form 114) for foreign accounts

• IRS Form 8938 (FATCA reporting) for specified foreign assets

Penalties for failing to report can be severe, sometimes exceeding the value of the unreported account itself.

Just as important: information disclosed for EB-5 source-of-funds purposes should be consistent with tax filings. Mismatches between immigration documentation and tax reports can raise red flags during audits or future immigration reviews.

ITIN vs. SSN: Which One Do EB-5 Investors Need?

EB-5 investors often need a Tax Identification Number (TIN) well before they begin working in the U.S.

• ITIN (Individual Taxpayer Identification Number): Required if you have U.S. tax or reporting obligations but are not yet eligible for a Social Security Number.

• SSN (Social Security Number): Required once you receive your green card and are authorized to work in the U.S.

Investors typically apply for an ITIN using IRS Form W-7, often alongside their first U.S. tax return. Once a green card is issued and the investor is physically present in the U.S., they can apply for an SSN through the Social Security Administration.

Understanding K-1s, Allocations, and “Phantom Income”

Most EB-5 investments are structured through a New Commercial Enterprise (NCE) taxed as a partnership. Each year, the NCE files Form 1065 and issues investors a Schedule K-1.

Important distinction:

• Allocation: Your share of the NCE’s income or loss, reported on the K-1

• Distribution: Actual cash paid to you

Even if you receive no cash, you may still owe tax on income allocated to you—commonly known as phantom income. This surprises many first-time EB-5 investors.

Tax Withholding for EB-5 Investors

Tax treatment depends heavily on whether you are a U.S. tax resident.

• Non-resident investors: U.S.-source income allocated through the NCE is typically subject to IRS withholding—often up to 37% for effectively connected income.

• U.S. tax residents (green card holders): Withholding usually does not apply. Instead, taxes are paid through estimated payments or when filing an annual return.

When year-end distributions occur, withholding requirements may reduce the cash an investor receives, even if profits are modest.

Pre-Immigration and Year-End Planning Opportunities

For investors who have not yet become U.S. tax residents, the period before residency begins can be a powerful planning window. This may include:

• Restructuring foreign business ownership

• Timing capital gains or income recognition

• Making gifts or estate transfers before U.S. rules apply

Even for investors already holding a green card, year-end decisions around income timing, deductions, and distributions can meaningfully impact the 2025 tax outcome.

A Coordinated Approach Matters

EB-5 sits at the intersection of immigration, investment, and tax law. As 2025 ends, proactive planning—coordinated between immigration counsel and experienced international tax advisors—can help investors avoid penalties, reduce unexpected liabilities, and enter the new year with confidence.

The right preparation now can make tax season significantly smoother later.  We highly recommend connecting with a tax professional for your 2025 tax filing.

Because your Green Card Shouldn't Take a Lifetime.