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I thought it would be good to start a thread where those of us living abroad can go to talk about the complexities of having to pay tax on non-resident income, FACTA, investing for retirement when you don't have access to a 401(k) or an IRA, etc. Hopefully we can pool our experience on the best financial practices for those living abroad. I will try and see what goes on in this Boglehead thread about the same topic and see if I can update the OP. Here are some of the basic categories I thought of and if there is anything missing (there is), just let me know and I will update the OP: Checking Exchange Rates http://www.xe.com Sending Money Home Ask me about Foreign Exchange thread http://www.xetrade.com - not valid in all countries, but a good way to exchange currencies so you can pay bills back home, etc. http://transferwise.com/ - pay a flat fee to send money, mostly for EU countries http://www.currencyfair.com - similar to Transferwise Investing If you claim the FEIE, you cannot contribute to a Roth IRA. To do so, you need to have (a) compensation (b) a MAGI less than $112,000 (if single) and (c) at least as much compensation as you are contributing. In IRS Pub 590, it explicitly states that "Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs" are not counted as compensation. In order to contribute to a Roth IRA, you would need to include all of your income and then use foreign tax credits to offset your tax liability on that income. If you are using taxable accounts to save, don't invest in a Target Retirement Fund. You can claim a foreign earned income exclusion on any income generated for you by a fund comprised of international markets (these usually make up at least a part of a TRF). Taxes You should file a tax return every year, but if you can prove you live outside of American (via the bona-fide resident test or the physical resident test), you are eligible for the Foreign Earned Imcome Exclusion (up to $97,600 for 2013). If you are living in a country where taxes are lower than in the US, it is a good idea to take this exclusion. If you live in a country with similar or higher tax rates than the US, it might make more sense to claim a foreign tax credit. Doing this will allow you to do things like invest in a Roth IRA. Don't forget to file a state return. Some states make it easy to be an expat (mainly because they have no income tax), others make it really hard by saying that if you have any sort of connection to the state (driver's license, bank account, voter registration, etc.) you are still a resident and need to pay taxes. Total Confusion fucked around with this message at 13:45 on Mar 12, 2014 |
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Oct 8, 2013 16:53
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AFAIK, the only limit to investing in an IRA when living abroad is that the amount you invest has to be equal to or smaller than your adjusted gross income for the year (up to $5,500). This means that you can't take the Foreign Earned Income Exclusion if you earn less than $97,600 as it would leave you with an AGI of $0 and have to go with foreign tax credits. I think from the other thread you said you lived in Singapore, which looks like it has lower tax rates than America (topping out at 20% or something), so it probably makes sense to take the FEIE. That would mean that you can only contribute however much you made for the one month of working in the USA (if you make less than $97,600) or end up paying more taxes to America on your Singaporean income.
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Oct 10, 2013 08:56
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(Not an expert, so someone else feel free to correct me if I'm wrong) From what I understand, it would probably be better to wait until next year when your assets will be taxed at long-term rates. If you took the FEIE, your $25,000 foreign salary would be $0 in America, so you would only have $15,000 in US income, which would put you into the 10-15% tax bracket. If you are in that bracket, you pay 0% long term capital gains tax. If you don't wait, your short term gains will be taxed as normal income, which with $12-15,000 in income, you could end up owing taxes on (max 15%).
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Oct 23, 2013 07:14
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Saint Fu posted:Do you know if you are allowed to contribute to a Roth 401k while claiming the FEIE? As long as you don't need to have earned income to contribute to a Roth 401(k), I would think you would be OK, but you should probably check with a tax advisor just to be sure.
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Nov 7, 2013 09:06
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slap me silly posted:Can I get some details or examples? Are we talking holding VGTSX with Vanguard or is this more complicated? I got the initial info from 80k in the long-term investing thread: 80k posted:Funds-of-funds are ineligible for the foreign tax credit, even if they hold international stocks. Normally, in the taxable account, if you own index funds that hold international stocks and distributed foreign income, you will be able to claim a foreign tax credit on your tax return. Thus if you are going to put any asset class in a taxable account, the first priority should be international stock funds. And I found this from Vanguard: https://advisors.vanguard.com/VGApp/iip/site/advisor/investments/taxcenter/foreigntaxcredit
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Nov 13, 2013 14:41
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Anonymous Zebra posted:Does anyone have any experience living in Switzerland and having to deal with US finances? My financial advisor is a nice dude, but it's obvious he has never dealt with his clients living outside the states for more than a few months when we had to explain to him how to make an international phone call to us. My wife and I currently contribute our max for our Roth IRA every year and try to put a little money into a taxable joint account made up of a balanced set of mutual funds. We just moved in September, so we should still have income we made in the states, but for 2014 will we no longer be able to contribute to our Roth? Individually we make less than 97k a year while here, and I assume we are allowed to double that number as a married couple, right? That means when we take the exemption that we'll be at $0 for income? Do I still need to file a US tax return because of the money I'll make from my mutual funds (outside the funds in the Roth)? From what I've read, it looks like national income tax is .77% for married couples and the caton rate varies, with Geneva having the highest at like 17.5%, so you would have a max 18% income tax rate, which is basically about as low a tax rate you can get in the states (at $32,500 a year, your federal rate is 25%). You'd want to confirm all that but it looks like you would have to pay more tax at your income in the US than in Switzerland, so the FEIE might be best. I've wanted to talk to an accounting firm that specializes in expat tax affairs, but they charge like $100 for a half hour consult  But yes, file your taxes every year regardless of the money you make as that gets the clock ticking on the statute of limitations on the return.
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Nov 14, 2013 09:04
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Old Fart posted:
It depends. If you make less than ~$95,000 a year, then no. The FEIE is good for as long as you meet the requirements. If you live in a place with higher taxes than in America, you can also just use foreign tax credits to offset any taxes you might owe. Depending on what sort of assets you still have in the US (bank or investment accounts), you may have to pay taxes on those. Old Fart posted:
It depends on how much over $10,000 you have I suppose. If it's not hundreds of thousands of dollars, it shouldn't be much of a hassle at all. I had to file a FBAR for the first time this year and it seemed pretty straightforward: http://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html Old Fart posted:
It depends. Have you already contributed enough to SSI to claim a pension? If so, then yes. If not, then depending on which country you live in, you may be able to get credits in order to qualify for SSI if your country and the US have signed a totalization agreement. AFAIK, no, you can't get SSI earlier because you are living abroad.
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Feb 26, 2014 15:07
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Gold and a Pager posted:Sending Money Home Transferwise and Currency Fair lets you send money home for cheap. I've been using it for a while and the most I've had to pay was 5 EUR to transfer 1,200 EUR back home. Though it is not available for every currency. Total Confusion fucked around with this message at 08:51 on Mar 11, 2014 |
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Mar 11, 2014 07:48
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Pompous Rhombus posted:Is the foreign tax credit a 1:1 thing? I'm moving to Australia (ostensibly for good) early next year, and taxes there are probably always going to be higher than in the US. Assuming the exchange rate doesn't crater, I would hopefully be exceeding the ~$USD97k for the FEIE by mid-career. Is one more or less in the clear as far as Uncle Sam is concerned if you're paying higher taxes abroad and filing for the foreign tax credit? Yes, it is 1:1, if you owe $3,476 in US taxes and paid $4,000 in foreign taxes, the credit would take care of your entire US tax burden and then some (which you could then carry over to future years for up to 10 years).
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Jun 16, 2014 07:56
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As long as you can close the account from abroad, that should be fine.
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Mar 9, 2015 14:08
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astr0man posted:This isn't specifically a finance question, but do any of you (US expats) use a mail forwarding service? I'm moving abroad soon but I'm not sure if it's worthwhile/necessary? If you have good friends/family that you can have your mail sent to, just do that and then they can let you know if you get anything important. The only things I still get mail for are my US credit cards/banking stuff.
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Mar 9, 2015 17:46
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Oakland Martini posted:Anyone have any good approaches to paying off U.S. credit cards (and other U.S. bills)? I'm sick of paying fees to wire money from my Canadian bank (CIBC) to my American bank (Wells Fargo). I'd get rid of the U.S. bank account entirely if I could. Have you tried transferwise or currencyfair?
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May 21, 2015 12:32
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If you are moving to the Netherlands to work for a Dutch company then you will have to pay full Dutch taxes to the Netherlands on your worldwide income. You still will have to file your US taxes but should not end up owing any money to America assuming your only income is from your job and you don't have taxable investment accounts, rental property, etc. Dutch tax rates should be higher than in the US at pretty every income level, it would make more sense to use FTCs to cover your US tax liability as it gives you more options than the FEIE and isn't really any more complicated. FTCs are nice as they should allow you to contribute to a Roth IRA, I think you could be eligible for certain tax credits when you have kids, and any taxes paid above and beyond to what you would owe in the US can be carried over for 10 years, so if you go back to the States, then you could use them to pay fewer taxes. The US and Holland have a totalization agreement so you don't need to worry about having to pay SS taxes or that you will not qualify for SS in either country based on your time spent there. I don't know much about the 30% rule other than what I've seen on Google. I found this thread that seems to go pretty in-depth explaining the ins and outs of doing it. By electing to use this rule, it may change the math on whether or not it makes more sense to use the FEIE or FTCs to eliminate your US tax burden as it could reduce your Dutch tax burden to less than what you would owe on that same income in the US.
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Oct 29, 2015 15:18
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Boris Galerkin posted:What exactly does this mean? That I would contribute to the Dutch social security system and…? To be frank I don't really know how retirement/social security works in both the US and other parts of the world. I just assumed that in the US I would receive little to no benefit from the SSS anyway and my retirement would be covered by my own retirement savings. My understanding of totalization agreements is that their main purpose is so that if you work for a while in the US, but not enough to qualify for SS because you then moved to another country, but also did not work long enough to qualify for the local SS, then you would still be able to get your government SS benefit because, between your payments to the two countries, you paid enough to qualify. It also allows for Americans who are sent to a foreign country to work for a limited period of time to be exempt from local SS taxes and continue to just pay them back in America. Finally, they mean that you don't have to worry about paying two different SS taxes if you move to another country for a longer period of time/work for a foreign company. In your case, it just means that you will only pay SS taxes to the Netherlands and not to the US.
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Oct 29, 2015 15:42
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That's probably a question best addressed in the tax thread.
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Jan 31, 2016 21:28
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