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.”
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.
“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.
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.
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.
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.
It might be interesting to crosspost this to !politicaldiscussion@lemmy.world
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.
Unless you renounce US citizenship of course. I understand it’s a bit extreme, but it is a solution
