These posts are always so funny to me, because it implies you were completely happy with what the US has been funding for at least a year but now you want to talk about tax avoidance?
this post was submitted on 07 Nov 2024
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Yeah, it goes up faster than inflating each year, it seems. 126,400 per person or 253k for married I believe this year, which is a pretty fair bit especially considering you deduct the taxes you locally pay off the top first, afaik
"considering you deduct the taxes you locally pay off the top first"
i understood local taxation to be inclusive to the FEIE, can i see your source?
https://www.investopedia.com/terms/f/foreign-tax-credit.asp
https://www.irs.gov/pub/irs-pdf/f1116.pdf
I thought it was a Form 1116 thing, but I could be wrong for sure. IANAL and haven't yet done foreign taxes so who knows yet
oh i see. thanks.
yea, the 1116 is for people paying formal taxes to the foreign government directly, usually because you're living there as a permanent resident or operating a business full-time and significantly, have established your permanent tax home in that other country.
using the 1116, you don't pay all of the taxes twice, although you still pay some of them twice because the US wants that cash.
the FEIE, form 2555, means that your tax is still in the US and only requires that you're not in the US for 330 days out of the year to exempt income tax on up to 125k of income earned while outside of the country.
the feie does have a residency test as well, but the physical presence qualification of 330 days each year is simpler and requires much less trouble to set up initially (permanent residency, switching tax homes, work permits and all that) to qualify for, so I only deal with the physical presence test.
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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.
Do you live abroad? I'm expatting in a few weeks (long planned, not in a pure panic due to Trump) and would love ask a few questions if so!
I can try to answer. I've lived in Japan for almost a decade (this is my 10th year).
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"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 [email protected]
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.
Just trying to avoid this community turning into [email protected] where all the questions are about the US elections
in that case, you want to retrain your target parameters.
they're a bit wide.
They're currently set on "USA specific posts in a general community".
By the way, it's always curious to me that there is no large instance managed from the USA.
LW and feddit.nl are Dutch
Lemm.ee is Estonian
Feddit.org and discuss.tchncs.de are German
SJW and lemmy.ca are Canadian
Lemmy.blahaj.zone, aussie.zone and Reddthat are Australian
There is Midwest.social but it's quite small.
Any idea of the potential reasons?
"They're currently set on "USA specific posts in a general community"."
you might be drawing attention to the thing you're trying to avoid.
"Any idea of the potential reasons?"
No idea, although I was wondering the same thing.
there are so many non-english communities that I regularly search for lemmy demographics out of curiosity, but I can't even find ballparks on users categorized by nationality.
No idea, although I was wondering the same thing.
I just created a thread on [email protected] , let's see how it goes
nice, I'll save it.
I'm definitely curious.