Author Topic: How do taxes work if you move abroad?  (Read 4461 times)

Exflyboy

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How do taxes work if you move abroad?
« on: March 05, 2015, 02:55:21 PM »
Lets say you live in an income tax State (Oregon in this case).. you decide to retire abroad.

You still have your investments at Vanguard so you are presumably subject to Federal taxes?.. But not State taxes because your not a resident?

How does it all work?

Gimesalot

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Re: How do taxes work if you move abroad?
« Reply #1 on: March 05, 2015, 02:58:56 PM »
My understanding is that most income tax states still consider you a resident if you live abroad.  From my understanding, most tax experts recommend that you move to a state without income tax and establish residency before moving abroad.

As for federal taxes, American citizens are required to pay US income tax on all world-wide earnings.  There are tax credits available for taxes paid in other countries.

zoltani

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Re: How do taxes work if you move abroad?
« Reply #2 on: March 05, 2015, 03:05:25 PM »
Where is it that you plan on moving? When I was living in France I declared my income to the US, but since taxes are higher in France than US then I did not pay US taxes on it.

It is called the "foreign tax credit". If you pay less in taxes than you would in the US then you have to pay the difference. I am not sure how this works on a state level as I live in a state with no income tax.

ZiziPB

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Re: How do taxes work if you move abroad?
« Reply #3 on: March 05, 2015, 03:05:36 PM »
Quote
My understanding is that most income tax states still consider you a resident if you live abroad.
 

That doesn't sound right.  If you move out of a state, at some point that state has to stop treating you as a resident, no?  I think the key would be establishing residency in another state or country. 

But I really don't know how it works and will be following this thread as I am interested in this myself (planning to move to Europe upon retirement).

SnackDog

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Re: How do taxes work if you move abroad?
« Reply #4 on: March 05, 2015, 03:10:11 PM »
Best if you google for rules in your state. I am a Californian, but under the Safe Harbor rule I stopped paying state tax after two years living abroad.  A more frugal choice from a tax perspective would have been to move to Nevada or Texas before going abroad, but I was unwilling to liquidate property to save those two years of income tax.

lhamo

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Re: How do taxes work if you move abroad?
« Reply #5 on: March 05, 2015, 03:13:00 PM »
In a lot of places it depends on if you retain property or not.  One of the reasons we sold our NYC apartment was that NY has VERY strict rules about residency.  If you have property there that is not clearly an investment property, then you are considered a resident. 

We shipped all our stuff back to my mom's, and switched our driver's licenses back to WA when we moved to China.  All my bank statements, etc. get mailed to my mom's address.  However, we still won't qualify for WA residency for college tuition purposes until we have physically relocated to WA for a year.  Another good reason to go back (tuition for the UW is $12k for residents, vs $36k for non-residents)

KCM5

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Re: How do taxes work if you move abroad?
« Reply #6 on: March 05, 2015, 03:18:30 PM »
Yeah, it depends on the state. But according to this http://www.lanepowell.com/wp-content/uploads/2012/05/PTXL1205_Gadon1.pdf it sounds like Oregon would no longer consider you a resident and subject to state tax once you've established your residency elsewhere.

We're eventually going to emigrate to another country but before doing that we're going to travel for a couple of years. In our state (Iowa), because we won't have established residency elsewhere, we will be subject to state tax for the time that we're traveling but will no longer be subject to state tax once we establish residency in the country we emigrate to - in our case that will be done by visas, enrolling child in school, getting jobs, etc.

AllieVaulter

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Re: How do taxes work if you move abroad?
« Reply #7 on: March 05, 2015, 05:49:40 PM »
following...

JoJo

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Re: How do taxes work if you move abroad?
« Reply #8 on: March 05, 2015, 05:56:04 PM »
I'm following this too.

Here's my unique situation:
Currently live in tax free state
I want to be a nomad for awhile (no permanent address, but likely spend about 11 months a year abroad).  Rent an apartment as long as my tourist visa allows then move onto the next country.
What would you do about your mail?  My best plan is to change address to my parents house but they live in an income tax state and I'll have enough income in ER to owe state taxes there (at least $1000+ a year).  One idea is to pay a friend in my current state to shred my mail.  Is there a better plan?

MrMoogle

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Re: How do taxes work if you move abroad?
« Reply #9 on: March 05, 2015, 07:06:42 PM »
So you need to pay attention to your state laws and the laws of the country you're living in.  There's too many options.  There are lots of ex-pat blogs out there for different parts of the world.

Federally, if you decide to work overseas, there's the Foreign Earned Income Exclusion.  There's rules on whether or not you qualify, but if you're outside the US for 330+ days a year, then you qualify.  You won't have to pay taxes on the first $100k (2015) for the US.  You'll have to pay in the country obviously.

What would you do about your mail? 
Check your parent's state laws and your state's.  Just because your mail goes there does not necessarily mean you're a resident.  I'm from Alabama.  If I sent my mail to Tennessee (no income taxes), Alabama would still consider me a resident.

lhamo

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Re: How do taxes work if you move abroad?
« Reply #10 on: March 06, 2015, 02:26:15 AM »

What would you do about your mail?  My best plan is to change address to my parents house but they live in an income tax state and I'll have enough income in ER to owe state taxes there (at least $1000+ a year).  One idea is to pay a friend in my current state to shred my mail.  Is there a better plan?

I've never used them but many expats in Beijing use mail receiving/forwarding services -- you have your mail sent to them and they will forward on packages, etc. and (if you want) open and scan mail and put it on a server somewhere where you can get it.  I think most started out just as forwarding services but now the scanning is more common.

jlajr

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Re: How do taxes work if you move abroad?
« Reply #11 on: March 06, 2015, 05:10:34 AM »
I don't know about state income tax, but someone mentioned that US citizens have to pay federal income taxes regardless where they live. In general, they have to report their income (and in most cases, also their accounts in non-US financial institutions - aka FBAR).

However, whether they actually have any tax liability depends on other factors, such as the Foreign Tax Credit, which someone else mentioned.

There is also a significant Foreign Earned Income Exclusion (up to $99,200 for 2014), although it is not relevant if you are retired and your income is passive.

lovesasa

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Re: How do taxes work if you move abroad?
« Reply #12 on: March 06, 2015, 06:22:01 AM »
I don't know how the taxes work for withdrawing from retirement accounts, but if you're planning on working abroad I can confirm that the Foreign Earned Income Exemption is totally a thing and it is awesome. The only downside is (as I just discovered) you are unqualified to contribute to a Roth if you claim the FEIE, unless your income exceeds $100,000 (~$99,200 for 2014?) by the amount of your contribution. You cannot only claim part of the FEIE, and if you revoke the right to claim it then you can't claim it for the next 5 years. Total bummer.

https://americansabroad.org/issues/taxation/foreign-earned-income-and-roth-ira-contributions-revised/

As far as residency is concerned, I think when you move abroad you are still considered a resident of whatever state you were last a resident of. I'm pretty sure this is true for legal purposes, anyway (i.e. if you want to write a US will). As others stated above, the tax implications of this might depend on the state. See a local CPA with experience dealing with epats.


What would you do about your mail?  My best plan is to change address to my parents house but they live in an income tax state and I'll have enough income in ER to owe state taxes there (at least $1000+ a year).  One idea is to pay a friend in my current state to shred my mail.  Is there a better plan?

I've never used them but many expats in Beijing use mail receiving/forwarding services -- you have your mail sent to them and they will forward on packages, etc. and (if you want) open and scan mail and put it on a server somewhere where you can get it.  I think most started out just as forwarding services but now the scanning is more common.

I'm a US Expat living in Kunming. Do you have any more details (or names?) about these forwarding services that have success in China. I've heard nightmares about stuff getting trapped in customs indefinitely, but this sounds promising. For now I use the mail forwarding service of "Mom opening all my mail" but she sometimes 'forgets' to tell me about important things...
« Last Edit: March 06, 2015, 06:25:15 AM by lovesasa »

SnackDog

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Re: How do taxes work if you move abroad?
« Reply #13 on: March 06, 2015, 06:58:52 AM »
We have mail forwarding, but it is not a big deal.  If it went away, I wouldn't particularly care.  All bills are done electronically, from credit cards to property tax.  The only things I can't do electronically are vote and receive holiday cards from my mother.  Voting is boring. And Mom is on Facebook these days.

lovesasa

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Re: How do taxes work if you move abroad?
« Reply #14 on: March 06, 2015, 07:11:58 AM »
You can still vote from abroad. Your local consulate should be able to help you figure out the registration etc and a drop off location.

SailorGirl

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Re: How do taxes work if you move abroad?
« Reply #15 on: March 06, 2015, 09:06:59 AM »
This is the service that many sailors use.  Offers a street address and scanning.

http://www.sbimailservice.com/