why: so the government won’t be able to use your money for whatever the fuck they’re planning for the next 4 years.
as a traveler, none of my money has been funding Israel, for example.
one-step method: you basically fill out one extra tax form called FEIE while you’re doing your taxes, write down the dates you were outside of the country, and then since you aren’t in the country and are not receiving any services from the US, you don’t have to pay income tax up to a certain amount (it’s a little over 125k this year).
But if you earn over the threshold, you’re expected to pay taxes to the US government, no matter where you’re actually living or working, no matter if you’re also paying taxes wherever you currently are. The US is the only country in the world to assert that it has the right to tax its citizens remotely in this manner. It’s not normal.
The US has double taxation treaties with over 60 countries. When you pay taxes somewhere else, you deduct all of that tax from your US taxes above the $125k.
Though I definitely agree the IRS shouldn’t need these treaties, because if you’re not living there, why should you even need to file?
Because US law says so lol
Y’all just now learning that laws are written for the benefit of the ruling regime, not the peasants.
There were only “two parties in all States,” Randolph concluded. “The ins and the outs.” The ins construed governmental power broadly for the gain of their own “patronage and wealth,” while the outs tried to limit such power. “But let the outs get in . . . and you will find their Constitutional scruples and arguments vanish like dew before the morning sun.”
It’s Navy SEAL protection money.
They also charge you a crazy exit tax if you want to give up citizenship in order to save on taxes. They always get their pound of flesh.
Which is absolutely wild to me, considering that all natively born citizens received their citizenship involuntarily at birth.
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poli scie 101… they have the monopoly on violence
That’s actually libertarian idiot 101, different class, held in the garage of a disheveled rancher flying a gadsden flag.
the state has monopoly on violence…
It does not
go do some against a “nazi”, plz report back the results 🤡
WTF are you even talking about?
Anyone who throws out clown emojis is a clown themselves.
It’s the internet rule 42069.
Good.
“over the threshold, you’re expected to pay taxes”
sort of, that’s the “up to 125k” limit part of the FEIE(readjusted for inflation every year).
you still don’t pay taxes on the first 125k.
earning more than 125k is not a problem most people have.
The problem most people have is not knowing that the feie exists in the first place and there are legal, straightforward ways to avoid paying income tax while saving money traveling.
“no matter if you’re also paying taxes wherever you currently are…”
this is very iffy and depends on a lot of factors.
again, for most regular people, foreign income tax credits will erase most financial duties to the US.
“The US is the only country in the world…”
nearly.
“It’s not normal.”
nope, it’s definitely weird and it sucks.
but at least there’s the FEIE.
Double taxation treaties are very common. What I’ve been told by US coworkers makes the US stand out is that you still need to file your taxes with the IRS, even when living abroad. No idea if that’s actually the case.
I have lived outside my native country for a while and only had to file taxes in my country of residence (neither of which is the US), because there’s a DTAA in place between the two.
Add that to the list
It’s not the only country. I’ve lived in another country that was just like that. I bet other countries have the same rule to avoid some tax loophole. Or just because they can.
Well, it is on them to find me and this income.
That said, if you’re making over 100k trumps tax cuts will probably be pretty nice for you.
Not if you live in a state with state and local income tax. They capped SALT deductions, so you’re basically paying tax on taxed income.
But if you live overseas you in fact do not live in a state.
Some states still require you to file even if you don’t live there, but have ties, and may tax your income.
can you define ties? Because I don’t see how if I move from state A to state B that they will take income I earn while living in state B.
You own property in the state, or consider it your primary residence, you have income from business or investments in the state.
It really varies state by state.
Further, not doing so could impact things like voter registration depending upon the state. The whole system of US voting is a mess since it’s all at the state level.
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I always find it mad as hell that Americans have to pay tax in the US even if they are living and earning elsewhere
Especially given generally Americans are pretty allergic to reasonable taxation
yeah it is totally banana stacks, and nobody tells anybody else how to get around that, of course.
since nobody knows the sacred knowledge anyway.
some tax guy, not my tax guy, just a random guy who worked in taxes, offhandedly mentioned it to me like it was no big deal one day and I was like whaaaat?
most of the expats I know just don’t pay taxes because they’re dumb, or they’re paying taxes that they don’t need to because nobody told them about the FEIE.
You still need to file every year. An advisor at least here in Germany can do both countries, but you pay a premium for that.
I addressed that in a comment but I did not include that in the body.
fixed.
The FEIE is super simple to fill out.
pretty sure you have to fill out the 2555 as well bro
you also have to pay tax where you are domicile, aka where you live
“…the 2555 as well…”
nope, not “as well”, the 2555 is the single FEIE form I am explaining about in this post.
“you also have to pay tax where you are domicile”
nope, inclusive taxes are usually paid directly to the foreign government.
you can claim a US housing tax exemption for the same reason as the FEIE, but paying taxes on your foreign housing is usually unnecessary.
yeah ok the 2555 is the FEIE you mentioned.
its important to note that if youre within the US for more than that 35 day exemption, you start to pay taxes pro-rata.
I think you agreed with what I said just using different words about paying taxes where you do live- yes, you pay them directly to the government where you are domicle.
“yeah ok the 2555 is the FEIE you mentioned.”
yeah, that’s why i said it, haha.
“if youre within the US for more than that 35 day exemption, you start to pay taxes.”
are you going to rewrite everything I said in the post and comments?
to me?
"you pay them directly to the government where you are domicle. "
you are!
You’re paraphrasing my words back to me.
huh.
curiouser and curiouser.
I heard you need to file every year even if you’ve never lived in the US.
Depends. For example in Finland the filing is done for you every year by the tax authorities and tax is deducted every month from your salary. Once a year you get either money back or need to pay more if your work situation changes during the year. You can also correct them by saying “hey I paid this bus card” etc. and get money back.
In Germany it works about the same, except they charge you quite a lot more every month. Here you do not have to file, but if you do you usually get a lot of money back. Filing is more complex than in Finland, so you might want to have a tax advisor to do it for you.
I read somewhere that Eritrea (the North Korea of Africa) is the only other country that has this policy.
Once again the US is in good company.
However, since you don’t pay taxes on that money, it can impact which kinds of retirement accounts you can use based in the US, if any. Also, trying to invest as a US citizen outside the US can suck because of all the agreements with US banks. Many Japanese platforms, for instance, won’t touch me because of US reporting requirements. I also can’t functionally use the tax-advantaged retirement accounts here because many amount to what are called PFICs by the IRS which requires paperwork and are taxed punitively more than wiping out any advantage the retirement accounts would have.
You’re also going to have a rough time getting a US investment account if you don’t have one already. Then you have to figure out how to have a US phone number because two-factor auth basically requires it for any bank or anything that will touch you.
There are other “fun” things about being a US citizen living abroad.
“However, since you don’t pay taxes on that money, it can impact which kinds of retirement accounts you can use, if any”
The math works out in your favor.
wouldn’t you rather have that money earning interest now rather than receiving a few hundred later on when you probably don’t need it as much?
“Also, trying to invest as a US citizen outside the US can suck because of all the agreements with US banks.”
it can suck, and it can also be awesome.
I see you’re speaking specifically to Japanese banking standards, which I would agree are one of the more difficult countries for a US citizen to interface with.
but that’s a great thing about there being about 200 countries.
Bank somewhere else if you want to.
try Hong Kong or China or Thailand or Portugal or Sweden or you know, a lot of countries.
you don’t have to live in the country you bank in.
Yeah, some is specific to Japan, though there will be similar hurdles anywhere the US has an agreement (and that the target country’s institutions actually follow it, I suppose).
I have a couple of retirement accounts in the US that I contributed to before (I moved overseas in my early 30s) that I basically can’t touch for a number of reasons right now. Just wanted to throw it out there.
Do you live abroad? I’m expatting in a few weeks (long planned, not in a pure panic due to Trump) and would love ask a few questions if so!
I can try to answer. I’ve lived in Japan for almost a decade (this is my 10th year).
That’s so cool!
How old (ish) were you when you moved?
Did you speak any Japanese before?
Any consideration towards relocating again?
Any other stories you want to share?
ありがとうございます、友達
- moved in my early 30s
- had studied Japanese in a couple of classes and then mostly on my own, but I could navigate and order food. My reading was (and still is) fairly bad
- not really. Partly due to age, but I do quite like it here. It would take something huge to make me move again
- no real stories that I can think of. Expect communication issues and accidental hurt feelings due to language/culture issues at first as it’s pretty unavoidable whilst learning.
It might be interesting to crosspost this to [email protected]
Also, I know you mean good, but this isn’t relevant to probably a high number of Lemmy users who are not US citizens
No, as labeled, this is a US specific tax procedure that people who don’t pay US taxes won’t be able to take advantage of.
but lucky for them, most of them don’t have to!
most countries outside of the US have a similar procedure included in their far more citizen friendly tax codes.
the us is way behind other countries on…well a bunch of stuff, but with taxes specifically, you don’t usually have to declare that you’re not in the country if you don’t pay taxes, you just don’t pay the relevantaxes and the government only bothers you if you’re a big old liar.
I’m sorry, I’m not sure I get your comment. If this is a US specific procedure, then wasn’t my point that is isn’t relevant to non US citizens Lemmy users correct?
correct, yes.
I was trying to tactfully point out your comment’s redundancy, given the specific post title and body explanation of US tax code relevancy.
it’s sort of like I made a post about male seahorses giving birth, and you pointed out that male zebras do not give birth.
correct, for sure.
Just trying to avoid this community turning into [email protected] where all the questions are about the US elections
in that case, you want to retrain your target parameters.
they’re a bit wide.
They’re currently set on “USA specific posts in a general community”.
By the way, it’s always curious to me that there is no large instance managed from the USA.
LW and feddit.nl are Dutch
Lemm.ee is Estonian
Feddit.org and discuss.tchncs.de are German
SJW and lemmy.ca are Canadian
Lemmy.blahaj.zone, aussie.zone and Reddthat are Australian
There is Midwest.social but it’s quite small.
Any idea of the potential reasons?
“They’re currently set on “USA specific posts in a general community”.”
you might be drawing attention to the thing you’re trying to avoid.
“Any idea of the potential reasons?”
No idea, although I was wondering the same thing.
there are so many non-english communities that I regularly search for lemmy demographics out of curiosity, but I can’t even find ballparks on users categorized by nationality.
The exemption only applies to earned income, meaning you cannot apply any of that $125k to stuff like investment returns, dividends, royalties, or rents collected.
That’s right.
The Foreign Earned Income Exclusion specifically applies to earned income, and does not apply to unearned income.
Nobody:
Literally no one:
Tax accountants:
Tax accountants:
Unless you renounce US citizenship of course. I understand it’s a bit extreme, but it is a solution
do you mean “another option to avoid paying taxes is renouncing your citizenship?”
in which case, yeah, extreme and still an option.
but the FEIE is way simpler and you can keep the few perks US citizenship still affords its rabble.
Which isn’t free btw.
Yeah, it goes up faster than inflating each year, it seems. 126,400 per person or 253k for married I believe this year, which is a pretty fair bit especially considering you deduct the taxes you locally pay off the top first, afaik
“considering you deduct the taxes you locally pay off the top first”
i understood local taxation to be inclusive to the FEIE, can i see your source?
https://www.investopedia.com/terms/f/foreign-tax-credit.asp
https://www.irs.gov/pub/irs-pdf/f1116.pdf
I thought it was a Form 1116 thing, but I could be wrong for sure. IANAL and haven’t yet done foreign taxes so who knows yet
oh i see. thanks.
yea, the 1116 is for people paying formal taxes to the foreign government directly, usually because you’re living there as a permanent resident or operating a business full-time and significantly, have established your permanent tax home in that other country.
using the 1116, you don’t pay all of the taxes twice, although you still pay some of them twice because the US wants that cash.
the FEIE, form 2555, means that your tax is still in the US and only requires that you’re not in the US for 330 days out of the year to exempt income tax on up to 125k of income earned while outside of the country.
the feie does have a residency test as well, but the physical presence qualification of 330 days each year is simpler and requires much less trouble to set up initially (permanent residency, switching tax homes, work permits and all that) to qualify for, so I only deal with the physical presence test.
Gotcha, okay. So you could do it either way, but for most people ($125k and below per person) it’s probably just better to use the feie it seems
This is great, thanks for sharing all this.
exactly, the feie makes tax mitigation way simpler for most full-time travelers at most income levels.
you’re welcome, I love it when people find this stuff useful!
If you were employed by a foreign company that has no presence in the US how exactly would the IRS know whether you’ve earning more than $125k?
Honor system
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Maybe I’m not understanding what you mean, but if someone works and lives abroad for 330 days of the year they’ll likely have a bank account established within that country so that they don’t have to deal with all of their daily financial activities being international transactions.
There is a system whereby foreign banks are obligated to report accounts held by Americans to the US for “anti terrorism” purposes.
And as a us citizen you are also obligated to report all of your foreign accounts in a FBAR filing each year.
There is a system whereby foreign banks are obligated to report accounts held by Americans to the US for “anti terrorism” purposes.
Could you give me a name, or at least some link to a government website that describes the system you’re talking about?