Author Topic: Expat tax question  (Read 1545 times)

miranda622

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Expat tax question
« on: January 04, 2017, 07:27:04 PM »
My husband and I live in the US, but he's from Australia originally and we've gotten Australian citizenship for our 2 kids. We're happy where we are for the time being, and having recently discovered the joys of Mustachianism, we're working to grow our business and max out all our tax-advantaged investment accounts to fund an early retirement.

College is, obviously, a big expense on the horizon, though not for about a decade. We're considering whether that might be a good time to retire (if we can), head to Australia or New Zealand, where I could also get a visa easily, and enroll the kids in school there (where average tuition even for top schools seems to be in the range of $5000-8000 USD per year). As our business is remote, we could potentially keep it going from there, though time zones would be a bitch with our US clients. My husband also has a lot of family over there, and his parents probably won't be able to travel much at that point - plus better healthcare, and generally far more reasonable people/culture, so we think we would like to make the move at some point -- but want to make sure we don't get screwed on taxes.

We'll plan on talking to an expat tax advisor soon, but a few Qs if anyone knows/has experience in this field:
- We're working to fund ROTH IRAs as well as 401ks. The US won't tax the growth, but if we're living in another country at the time we want to cash the accounts out, would they consider the gains to be taxable?
- Would we be able to continue running a US-based business, with US employees, from AU or NZ? Who would tax that if so? We currently have an LLC taxed as an S Corp, not sure if we'd need to change that.
- Could we keep our US investment accounts open and keep putting money into them?
- Any other challenges/pitfalls we should be aware of?

Thanks for any help!


bigchrisb

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Re: Expat tax question
« Reply #1 on: January 04, 2017, 07:35:18 PM »
Hi, an Aussie about to head overseas here.  I don't have the answers to your questions, but am pretty interested in what they might be!  If you have any questions about the Aus end, don't hesitate to reach out.

miranda622

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Re: Expat tax question
« Reply #2 on: January 04, 2017, 07:42:08 PM »
Thanks bigchrisb! Where are you in Oz?

(Also realized this should have maybe gone into the Tax section, though it deals with investments too -- mods, feel free to move if desired.)

bigchrisb

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Re: Expat tax question
« Reply #3 on: January 05, 2017, 10:32:38 PM »
I'm in Canberra.  Where are you heading to?

While its now a beast of a thread, the Australian Investing thread has some useful info in it for Australian residents.

SnackDog

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Re: Expat tax question
« Reply #4 on: January 06, 2017, 11:11:50 AM »
All US sourced income will be taxed in the US. As an American, all your income, regardless of origin, is taxed. Your US investments maintain their US tax advantages.

My advice is to offshore your business and then figure how to divide the income between you and your spouse to minimize overall taxes.

miranda622

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Re: Expat tax question
« Reply #5 on: January 08, 2017, 09:40:57 AM »
bigchrisb, my in-laws all live in Canberra, so I've spent plenty of time there! Not likely where we'd move with the housing prices the way they are though, we're musing over somewhere in Tasmania or Aukland NZ, though we haven't spent time in either region yet.

SnackDog, thanks for the feedback - I know the US won't loose its hold on us as far as taxes go, the main concern from our perspective is making sure if we work on funding a Roth IRA, that we won't lose the tax-advantaged status of the gains if it's not recognized by another country. From what you're saying it sounds like probably not an issue, which is good to know. Will try to touch base with an expat CPA on all this soon!

MustacheAndaHalf

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Re: Expat tax question
« Reply #6 on: January 08, 2017, 07:08:53 PM »
You didn't say if you have U.S. citizenship.  When U.S. citizens leave the U.S., they are taxed wherever they go.  America is one of the few (only?) countries which tax citizens working in other countries.  But if you're an American citizen, you also get to exempt about ~$80-90k of foreign income from tax.

Any investment income you gain from investments in the U.S. will be taxed there - no foreign exemption on that.  You might want to compare tax brackets in U.S. vs Australia to decide where to keep that money.  Maybe some in the U.S. (hedging against currency problems in Australia!) and take some with you.  You could also withdraw the money from retirement accounts over time, keeping in the lowest tax bracket.

This year may bring some interesting tax changes.  Both Congress and the President elect want to cut business taxes by more than half (35% to 15%).  Since it was a campaign promise, I think it's likely.  It might be worth your while to keep the business running in the U.S. at those low tax rates.