Quote:
Originally Posted by Ron.
What you fail to realize is moving to another country does not exempt you from paying U.S. taxes. You can move to any other country in the world but you'll be paying US taxes as well as taxes in the new country you decide to relocate to.
The USA is the only country that makes its citizens do that. The only way to NOT PAY U.S. taxes is to opt out of the tax system. The only way to do that is by renouncing your U.S. citizenship.
Keep that in mind as you ponder the thought of "getting away" from the USA.
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Not quite right.
You can claim an exemption from U.S. Income tax of $91,400 for 2009 (and lesser amounts for earlier years) in earnings from employment or self employment while residing outside of the U.S. for a full calendar year, or for any fiscal 12 month period providing you are not in the U.S. for more than 35 days during that fiscal year.
Because the US taxes its citizens on the basis of their nationality and not on the basis of their residence, the concept of 'offshore' is not very useful to a US national from a residence point of view. There is an income tax concession available during non-residence, but beyond that the only real option for a US citizen is to change nationality. In all other respects the international tax situation of an individual citizen is about the same whether they are in or out of the US.
US expatriates who meet the Physical Presence Test or meet the Bona Fide Resident Test may be able to take advantage of the Foreign Earned Income Exclusion and or the Foreign Housing Exclusion.
You are considered physically present in a foreign country (or countries) if you reside in that country (or countries) for at least 330 full days in a 12-month period. You can live and work in any number of foreign countries, but you must be physically present in those countries for at least 330 full days. The qualifying period can be any consecutive 12-month period of time. A "full day" is 24 hours; days of arrival and departure are generally not counted in the physical presence test.
A person is considered a "bona fide resident" of a foreign country if they reside in that country for "an uninterrupted period that includes an entire tax year." A tax year is January 1 through December 31. Brief trips or vacations outside the foreign country will not jeopardize status as a bona fide resident. If the foreign government concerned has determined that a person is not subject to their tax laws as a resident, the Exclusions will not be available.
These benefits seemed under threat in 2004, but they were confirmed in the Tax Reconciliation Act of 2005 (passed in 2006) albeit with restricted terms.
US citizens and resident aliens who are outside the United States (and its possessions) have the same requirements to file tax returns as anyone living in the United States. Income from worldwide sources must be considered when determining if a federal tax return must be filed. In general, foreign earned income is income received for services performed in a foreign country.
If you pay foreign taxes, it may be possible to offset these against US taxes if there is a double tax treaty with the country in which you are resident.
The concept of 'tax home' is used in connection with foreign residence. Generally, a person's tax home is the general area of her main place of business, employment, or post of duty where she is permanently or indefinitely engaged to work. A person is not considered to have a tax home in a foreign country for any period during which their abode (the place where they regularly live) is in the United States.
United States Expatriate Tax Site: Tax Position of US Citizens Overseas
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