A Reprieve
This is the sixth in my series of posts about the Sec. 965 Transition Tax and whether/how it applies to the small business corporations owned by tax paying residents of other countries (who may also have U.S. citizenship). These small business corporations are in no way “foreign”. They are certainly “local” to the resident of another country who just happens to have the misfortune of being a U.S. citizen. Read More
Shades of ODVP
This is the fifth in my series of posts about the Sec. 965 Transition Tax and whether/how it applies to the small business corporations owned by tax paying residents of other countries (who may also have U.S. citizenship). These small business corporations are in no way “foreign”. They are certainly “local” to the resident of another country who just happens to have the misfortune of being a U.S. citizen. Read More
While all Americans are taxed in their worldwide income regardless where they reside, they also have Foreign Earned Income Exclusion to reduce the tax burden. And this is what our today’s tax infographic is about. In 2018 you can eliminate up to $104,100 of foreign earned income on your U.S. expat tax return. Let’s look into details and what this exclusion is about. Read More
This is the fourth in my series of posts about the Sec. 965 Transition Tax and whether/how it applies to the small business corporations owned by tax paying residents of other countries (who may also have U.S. citizenship). These small business corporations are in no way “foreign”. They are certainly “local” to the resident of another country who just happens to have the misfortune of being a U.S. citizen.
Last night I was discussing the “transition tax” with an “individual” who is impacted by the tax AND is a Homeland American. He is a “tax resident” of ONLY the United States. For Homeland Americans who are subject to ONLY the U.S. tax system the “transition tax” is NOT a bad thing. Read More
This is the third in my series of posts about the Sec. 965 Transition Tax and whether/how it applies to the small business corporations owned by tax paying residents of other countries (who may also have U.S. citizenship). These small business corporations are in no way “foreign”. They are certainly “local” to the resident of another country who just happens to have the misfortune of being a U.S. citizen.
Those who fail to learn from history are doomed to repeat it Read More
“This legislation is being interpreted by a number of tax professionals to mean that individual U.S. citizens living outside the United States are required to simply “fork over” a percentage of the value of their small business corporations to the IRS. Although technically “CFCs” these companies are certainly NOT foreign to the people who use them to run businesses that are local to their country of residence. Furthermore, the “culture” of Canadian Controlled Private Corporations is that they are actually used as “private pension plans”. So, an unintended consequence of the Tax Cuts Jobs Act would be that individuals living in Canada are somehow required to collapse their pension plans and turn the proceeds over to the U.S. government” Read More
We received a question from Denise from Canada.
The question is: “I’ve heard a lot of words to describe people who were no longer U.S. citizens – “surrendered”, “relinquished”, “renounced” U.S. citizenship. What is the difference between these three terms?” Read More
Are you a US citizen living in Germany? It’s important to understand the US tax liabilities for Americans living abroad. While you are enjoying your expat life in Germany, don’t forget to file your US taxes!
In this article we will cover the following topics:
First of all, you need to determine if you are required to file a US tax return. It doesn’t matter where you live in the world as the US government taxes their citizens regardless of their residence. Is your annual income above the filing requirement of USD 10,400? Well, then you are required to file taxes with the IRS.
We want to talk about Bona Fide Residence Test, which one shall pass to qualify for FEIE. Are you an American abroad and you earn more than $10,000 USD a year? Then you are required to file U.S. federal tax return. If this is news to you, then you probably should know more about filing requirements for U.S. persons abroad.
However, if you are a U.S. expat who is aware of their tax obligations, then you probably heard about FEIE. It stands for Foreign Earned Income Exclusion. It allows you to exclude up to $104,100 for 2018 tax year from your taxable income. But in order to qualify for such exclusion, you need to meet requirements. One of them is to pass either Bona Fide Residence Test or Physical Presence Test.
Do you want to take advantage of the Foreign Earned Income Exclusion, the Foreign Housing Exclusion or the Foreign Housing Deduction? As a U.S. citizen or Green Card Holder living abroad, you still need to file annual U.S. federal tax returns. There are many different options, which American abroad has in order to cut the tax bill. However, the 3 above-mentioned ones are based on Foreign Earned Income.
It’s crucial to understand what FEI is for US expats. We prepared this easy infographic to provide more clarity on this topic. The definition by the IRS states that it’s income you receive for services you perform in a foreign country:
Check out the infographic below to understand the classification of types of income and what is considered to be NOT earned income. We also included what the IRS doesn’t count as a Foreign Earned Income.
To claim the foreign earned income exclusion, you must meet all three of the following requirements:
There are only two of the factors to be considered in determining whether you pass the bona fide residence test: the length of your stay and the nature of your job. You need to remember that you do not automatically acquire bona fide resident status just by living in a foreign country or countries for one year and your bona fide residence is not necessarily the same as your domicile. If you made a statement to local authorities in your residence country that you are not a resident of that country, and they determine you are not subject to their income tax laws as a resident, you can’t be considered a bona fide resident.
Are you a citizen of the United States who lives abroad? You probably know that the U.S.A. is one of only two countries that applies citizenship based taxation in order to tax its own citizens on their worldwide income, irrespective of where they live or work anywhere in the world. If you’re thinking about becoming a digital nomad or expatriating to another country, do you know how to avoid having to pay tax on your income while abroad? There could be huge penalties or tax evasion charges if you don’t file correctly. Fortunately, these important questions have answers.
By combining the right strategies for citizenship, residency, banking, incorporation, and physical presence in other countries, most people who work overseas can legally lower their U.S. tax owing to $0. In U.S. Taxes for Worldly Americans, Certified Public Accountant, U.S. immigrant, expat, and perpetual traveler Olivier Wagner preaches the philosophy of being a worldly American. He uses his expertise to show you how to use 100% legal strategies (beyond traditionally maligned “tax havens”) to keep your income and assets safe from the IRS.
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