US citizens who live abroad for at least 330 days a year, or establish permanent residence abroad, may qualify for the Foreign Earned Income Exclusion (FEIE). that FEIE excludes the first $112,000 of income from federal income tax, double that for a married couple. Social Security/Medicare (aka self-employment tax) are not excluded. Most states will want state income tax, so establish residence in a state with no income tax before going nomading.
What a joke. I'm all for getting medical care to people in general, but you can't redeem Medicare abroad. There are no shared medical treaties. You can't get a voucher. You can't even get exemptions for living abroad. You just pay in, and if you want value for paying in your whole life, you have to expend greenhouse gases flying back to the US and pay their extortionate health care prices which are probably cheaper uninsured where you are (at least it has been for me).
Did ustax.bz also tell you that if you are self-employed, you still need to file quarterly with the US, unless you are in a country with a totalitization treaty with the US?
unless you earn less than $400/yr.
> International Tax Gap Series
> If you are a self-employed U.S. citizen or resident, the rules for paying self-employment tax are generally the same whether you are living in the United States or abroad.
> The self-employment tax is a social security and Medicare tax on net earnings from self-employment. You must pay self-employment tax if your net earnings from self-employment are at least $400.
Only if your spouse also qualifies, which isn’t necessarily just because they have an ITIN (oh, and it only applies to their income, and not yours…which often won’t work out if your spouse is earning local wages). SS and Medicare aren’t collected on income earned abroad, but you also have to be careful because your credits towards benefits don’t accrue either.
I quickly dropped the FEIE in favor of the foreign tax credit. Turns out I paid more in Chinese taxes than I would have paid USA taxes, and computing the FTC on top of the FEIE was just too complex by hand.
Yeah this article is really pointless because it doesn't mention this. I'm an American citizen living abroad (still digital, no longer nomadic). I only pay SS and Medicare tax to the US.
Do not give up your US Citizenship for tax avoidance unless you are earning > $200k per year or making a lot of unearned income outside of the US.
Or you are in some weird situation where you permanently want to be in the US more than 35 days a year, but you don't work in the US, and don't want to be a citizen for some reason.
>Most states will want state income tax, so establish residence in a state with no income tax before going nomading.
Is this true? I thought that was only the case if they could prove you are an active resident. Of course, if you maintain a mailing address or residence in California/NY then you better believe they'll make sure you pay. If you cut ties completely, they don't have grounds to come after you.
I am still in disbelief that there is no other solution around this, its absolutely insane. I live/work in Switzerland, wife is Swiss, child born here etc. In Switzerland you have higher than average salaries and that 112k is easily surpassed. So they US is basically telling me to stay poor, or abandon my citizenship.
So hey if you have a citizenship somewhere else that is among one of the cool, slightly respecting rights of citizens countries in the world, and you never want to go to the U.S because reasons (including never wanting to work there - which seems weird given your digital nomad lifestyle) go ahead, renounce it.
There are plenty of accidental Americans who don’t even realize they are citizens. Also, if you have concurrent Chinese citizenship, you are supposed to renounce one or the other when you turn 18. Pricey, since renouncing citizenship doesn’t come cheap, but at least you’ll avoid the wealth tax if you don’t have any yet. This will be an issue in 10 or so years considering the anchor baby trend in the last decade or so.
The article fails to mention on which passport he travels which is quite relevant. The other passport you own will be linked to another country, financial system... and taxes.
not a very good article, without comparing U.S vs another country tax system/medicare pros and cons, it is impossible to make an enlightened decision, therefore making the title of this article irrelevant.
we would need one article per country vs the U.S for this to be informative imo.
One or two of my American colleagues in Berlin got in over their head with the IRS while out there. As the article says, there may be occasions brought on by adverse tax assessments that effectively mean you can't travel home again if you give up your passport.
This sadly was the case for my friend Amy, who couldn't travel back to Vermont for her grandmother's funeral. All because of "trivial" things like money and tax!
What other passports do you have available? The US tax obligations are onerous, but being a US citizen means good no-visa access to lots of places, and somewhere to return to if you want to.
Establishing a "reason to leave" when visiting the US might mean you need to buy a house elsewhere if you do renounce.
Many other Western countries offer equally powerful passports and an equal or better place to return to. In contrast the US is one of only two countries that taxes foreign citizens' income earned abroad, and the FACTA requirements are completely unique.
To use the article's own example, if you had an Irish passport I wouldn't see a lot of reason to keep hold of a US one (unless, of course, you did want to live or work in the US) - sure, in the event that you suddenly want to go to Equatorial Guinea some time, it'll cost you $200 and a bit of bureaucracy. But you'd make that back in the first year or two of not being subject to US taxation.
For visa-free travel you definitely can't beat the US. That's a compromise one has to weigh here. Most places that have good value in the areas outlined in the article, like the Caribbean and some African islands, have less than great visa-free travel access. This can be potentially be relieved somewhat with additional residency permits but it takes some serious consideration of your travel needs/wants.
> Being American entitles you to consular assistance from the US when you’re abroad
Please. Every document costs triple what it should be and then you are responsible for paying shipping and return shipping even if they decide to decline you. You are treated like a foreigner by your own country.
Let's talk about COVID-19: While countries like China and France procured vaccines for its citizens, the US did not. They gave out vaccines to other countries, but refused any assistance to its citizens saying it was the local government's responsibility (meanwhile every ambassador and foreign worker inside the embassy got priority shots). It's not their problem why?
The embassy prioritizes galas and showmanship more than actually helping citizens. If they cared, they'd be fighting to fix the stupid FBAR situation; you should not be treated like a criminal for having $10k in a bank in the country of your domicile, where you have a home and a family to look after.
Regardless of what you decide there is a 30,000 person waiting list for applications to be processed. They conveniently stopped during the pandemic and even now are processing maybe a dozen a month (all the names are published in the federal register so you can track it yourself).
Not without acquiring a citizenship of real worth. Uruguay isn't a bad choice. or Ireland.
If you aren't paying taxes (aside from sales taxes) you are at some remove leeching. Maybe there's a debate here, maybe you have registered as a resident alien in the places you nome to, but most nomads as I understand it seek to be visitor-status for as long as possible.
I know the digital nomad economy includes people who want to sublet their place to you and then get very upset when you show them you've registered as a resident: It plays both ways.
So by all means cease to be american, but please: pay your taxes wherever you are.
It will be a huge Opportunity Loss. Plus the way the world is shaping up, you will be better off with the country's Economic/Financial/Military Systems behind you.
If you can replace your American passport with a Canadian, Australian or Singaporean passport, it's not too bad: people from these countries have an easy time getting a visa to work in the US. [0] All while not being subject to American taxes while outside the US.
> Plus the way the world is shaping up, you will be better off with the country's Economic/Financial/Military Systems behind you.
Eh, it's a two-edged sword. On this aspect you are probably better off with the passport of a country that's clearly in the Western sphere, but also one that no-one actually hates. Think Canada or Switzerland.
[0] Though I don't know how well that works for former citizens?
Counterpoint: having a US passport has made securing banking very difficult as a lot of places don't want to deal with the IRS. It's been impossible for me to get an account on a local currency crypto exchange well because they don't want to deal with the FTC rules. The last one I looked at, their FAQs included a special place to upload your US citizenship renunciation forms. A US passport puts you an a lot lists with Syria, Yemen, Iran, etc. (and one could easily argue the US as a terrorist country).
Digital nomad? I had to check that from wiki. You still need to physically reside somewhere. Maybe securing that first and then worrying about tax burden?
gregjor|4 years ago
https://www.irs.gov/individuals/international-taxpayers/fore...
This is a huge tax break. You can exclude income earned from US sources too.
If you live in a foreign country and pay taxes there you may be able to deduct those from US taxes, depends on reciprocal tax agreements.
I used ustax.bz to help me figure this out, was worth it to me.
toastal|4 years ago
What a joke. I'm all for getting medical care to people in general, but you can't redeem Medicare abroad. There are no shared medical treaties. You can't get a voucher. You can't even get exemptions for living abroad. You just pay in, and if you want value for paying in your whole life, you have to expend greenhouse gases flying back to the US and pay their extortionate health care prices which are probably cheaper uninsured where you are (at least it has been for me).
That picture people have of retiring on a beach abroad, well, most of them stop once they realize they won't be covered for basically anything at their retirement age. https://www.cnbc.com/2019/08/08/retiring-overseas-how-medica...
More info: https://www.medicare.gov/Pubs/pdf/11037-Medicare-Coverage-Ou...
mellavora|4 years ago
unless you earn less than $400/yr.
> International Tax Gap Series
> If you are a self-employed U.S. citizen or resident, the rules for paying self-employment tax are generally the same whether you are living in the United States or abroad.
> The self-employment tax is a social security and Medicare tax on net earnings from self-employment. You must pay self-employment tax if your net earnings from self-employment are at least $400.
https://www.irs.gov/individuals/international-taxpayers/self...
seanmcdirmid|4 years ago
Only if your spouse also qualifies, which isn’t necessarily just because they have an ITIN (oh, and it only applies to their income, and not yours…which often won’t work out if your spouse is earning local wages). SS and Medicare aren’t collected on income earned abroad, but you also have to be careful because your credits towards benefits don’t accrue either.
I quickly dropped the FEIE in favor of the foreign tax credit. Turns out I paid more in Chinese taxes than I would have paid USA taxes, and computing the FTC on top of the FEIE was just too complex by hand.
idontwantthis|4 years ago
Do not give up your US Citizenship for tax avoidance unless you are earning > $200k per year or making a lot of unearned income outside of the US.
Or you are in some weird situation where you permanently want to be in the US more than 35 days a year, but you don't work in the US, and don't want to be a citizen for some reason.
0xy|4 years ago
Is this true? I thought that was only the case if they could prove you are an active resident. Of course, if you maintain a mailing address or residence in California/NY then you better believe they'll make sure you pay. If you cut ties completely, they don't have grounds to come after you.
Stevvo|4 years ago
I wouldn't call it a tax break; the US is the only country that double taxes its citizens on foreign-earned income.
jamisteven|4 years ago
bryanrasmussen|4 years ago
So hey if you have a citizenship somewhere else that is among one of the cool, slightly respecting rights of citizens countries in the world, and you never want to go to the U.S because reasons (including never wanting to work there - which seems weird given your digital nomad lifestyle) go ahead, renounce it.
seanmcdirmid|4 years ago
robertlagrant|4 years ago
Presumably they are easy to spot due to the mass emigration.
SoftwarePatent|4 years ago
peppermint_tea|4 years ago
not a very good article, without comparing U.S vs another country tax system/medicare pros and cons, it is impossible to make an enlightened decision, therefore making the title of this article irrelevant.
we would need one article per country vs the U.S for this to be informative imo.
anonymoushn|4 years ago
Simon_O_Rourke|4 years ago
This sadly was the case for my friend Amy, who couldn't travel back to Vermont for her grandmother's funeral. All because of "trivial" things like money and tax!
__d|4 years ago
Establishing a "reason to leave" when visiting the US might mean you need to buy a house elsewhere if you do renounce.
lmm|4 years ago
To use the article's own example, if you had an Irish passport I wouldn't see a lot of reason to keep hold of a US one (unless, of course, you did want to live or work in the US) - sure, in the event that you suddenly want to go to Equatorial Guinea some time, it'll cost you $200 and a bit of bureaucracy. But you'd make that back in the first year or two of not being subject to US taxation.
tylersmith|4 years ago
toastal|4 years ago
Please. Every document costs triple what it should be and then you are responsible for paying shipping and return shipping even if they decide to decline you. You are treated like a foreigner by your own country.
Let's talk about COVID-19: While countries like China and France procured vaccines for its citizens, the US did not. They gave out vaccines to other countries, but refused any assistance to its citizens saying it was the local government's responsibility (meanwhile every ambassador and foreign worker inside the embassy got priority shots). It's not their problem why?
The embassy prioritizes galas and showmanship more than actually helping citizens. If they cared, they'd be fighting to fix the stupid FBAR situation; you should not be treated like a criminal for having $10k in a bank in the country of your domicile, where you have a home and a family to look after.
mike_d|4 years ago
Regardless of what you decide there is a 30,000 person waiting list for applications to be processed. They conveniently stopped during the pandemic and even now are processing maybe a dozen a month (all the names are published in the federal register so you can track it yourself).
Most embassies and consulates aren't even taking appointments to process the form: https://uk.usembassy.gov/u-s-citizen-services/citizenship/lo...
switch007|4 years ago
“The U.S. Embassy London is currently unable to accept appointments for Loss of Nationality applications.”
No, they are not “unable”, they are unwilling or refusing.
ggm|4 years ago
If you aren't paying taxes (aside from sales taxes) you are at some remove leeching. Maybe there's a debate here, maybe you have registered as a resident alien in the places you nome to, but most nomads as I understand it seek to be visitor-status for as long as possible.
I know the digital nomad economy includes people who want to sublet their place to you and then get very upset when you show them you've registered as a resident: It plays both ways.
So by all means cease to be american, but please: pay your taxes wherever you are.
PaywallBuster|4 years ago
Probably bad idea to drop your passport if you don't have decent alternatives in place
baskethead|4 years ago
Ancapistani|4 years ago
rramadass|4 years ago
It will be a huge Opportunity Loss. Plus the way the world is shaping up, you will be better off with the country's Economic/Financial/Military Systems behind you.
mellavora|4 years ago
What support can he expect? under what circumstance? (hint-- it might be less than you think)
eru|4 years ago
If you can replace your American passport with a Canadian, Australian or Singaporean passport, it's not too bad: people from these countries have an easy time getting a visa to work in the US. [0] All while not being subject to American taxes while outside the US.
> Plus the way the world is shaping up, you will be better off with the country's Economic/Financial/Military Systems behind you.
Eh, it's a two-edged sword. On this aspect you are probably better off with the passport of a country that's clearly in the Western sphere, but also one that no-one actually hates. Think Canada or Switzerland.
[0] Though I don't know how well that works for former citizens?
toastal|4 years ago
anonymoushn|4 years ago
Pinegulf|4 years ago
anonymoushn|4 years ago
linuxfan2718|4 years ago