https://www.irs.gov/individuals/international-taxpayers/fore...
This is a huge tax break. You can exclude income earned from US sources too.
If you live in a foreign country and pay taxes there you may be able to deduct those from US taxes, depends on reciprocal tax agreements.
I used ustax.bz to help me figure this out, was worth it to me.
What a joke. I'm all for getting medical care to people in general, but you can't redeem Medicare abroad. There are no shared medical treaties. You can't get a voucher. You can't even get exemptions for living abroad. You just pay in, and if you want value for paying in your whole life, you have to expend greenhouse gases flying back to the US and pay their extortionate health care prices which are probably cheaper uninsured where you are (at least it has been for me).
That picture people have of retiring on a beach abroad, well, most of them stop once they realize they won't be covered for basically anything at their retirement age. https://www.cnbc.com/2019/08/08/retiring-overseas-how-medica...
More info: https://www.medicare.gov/Pubs/pdf/11037-Medicare-Coverage-Ou...
You can collect Social Security while living abroad.
unless you earn less than $400/yr.
> International Tax Gap Series
> If you are a self-employed U.S. citizen or resident, the rules for paying self-employment tax are generally the same whether you are living in the United States or abroad.
> The self-employment tax is a social security and Medicare tax on net earnings from self-employment. You must pay self-employment tax if your net earnings from self-employment are at least $400.
https://www.irs.gov/individuals/international-taxpayers/self...
Only if your spouse also qualifies, which isn’t necessarily just because they have an ITIN (oh, and it only applies to their income, and not yours…which often won’t work out if your spouse is earning local wages). SS and Medicare aren’t collected on income earned abroad, but you also have to be careful because your credits towards benefits don’t accrue either.
I quickly dropped the FEIE in favor of the foreign tax credit. Turns out I paid more in Chinese taxes than I would have paid USA taxes, and computing the FTC on top of the FEIE was just too complex by hand.
Do not give up your US Citizenship for tax avoidance unless you are earning > $200k per year or making a lot of unearned income outside of the US.
Or you are in some weird situation where you permanently want to be in the US more than 35 days a year, but you don't work in the US, and don't want to be a citizen for some reason.
On the flip side currently if you renounce your US citizenship it immediately triggers a 5 year back tax audit by the IRS and you have to clear your bill before they'll let you renounce.
Is this true? I thought that was only the case if they could prove you are an active resident. Of course, if you maintain a mailing address or residence in California/NY then you better believe they'll make sure you pay. If you cut ties completely, they don't have grounds to come after you.
I ended up having to go to court over it, twice so far. The first time was a “tax court”, and they deferred the judgement until I could obtain acceptable proof that I had held a driver’s license in another state for that year. The license itself wasn’t enough. The second time was after the judgement was issued anyways, and I had to file for it to be vacated.
If you have an address outside the US, it is a good idea to tell the IRS to mail you at that address, the states seem to be content with that as evidence that you live out of state.
Some states hold on to former residents harder than others: California and Virginia are notorious for trying to continue taxing people who leave. How you deal with this will depend on individual circumstances. Get professional tax advice if you expect problems with state tax authorities.
I wouldn't call it a tax break; the US is the only country that double taxes its citizens on foreign-earned income.
Double taxation would only happen if you had to pay taxes to a foreign country and the US. If you plan to work or earn income abroad as a US citizen it would be wise to choose a country that has tax reciprocity with the US, to avoid double taxation. That would include most countries that would be on the list of places worth renouncing US citizenship for.
So hey if you have a citizenship somewhere else that is among one of the cool, slightly respecting rights of citizens countries in the world, and you never want to go to the U.S because reasons (including never wanting to work there - which seems weird given your digital nomad lifestyle) go ahead, renounce it.
Presumably they are easy to spot due to the mass emigration.
not a very good article, without comparing U.S vs another country tax system/medicare pros and cons, it is impossible to make an enlightened decision, therefore making the title of this article irrelevant.
we would need one article per country vs the U.S for this to be informative imo.
This sadly was the case for my friend Amy, who couldn't travel back to Vermont for her grandmother's funeral. All because of "trivial" things like money and tax!
Establishing a "reason to leave" when visiting the US might mean you need to buy a house elsewhere if you do renounce.
To use the article's own example, if you had an Irish passport I wouldn't see a lot of reason to keep hold of a US one (unless, of course, you did want to live or work in the US) - sure, in the event that you suddenly want to go to Equatorial Guinea some time, it'll cost you $200 and a bit of bureaucracy. But you'd make that back in the first year or two of not being subject to US taxation.
Please. Every document costs triple what it should be and then you are responsible for paying shipping and return shipping even if they decide to decline you. You are treated like a foreigner by your own country.
Let's talk about COVID-19: While countries like China and France procured vaccines for its citizens, the US did not. They gave out vaccines to other countries, but refused any assistance to its citizens saying it was the local government's responsibility (meanwhile every ambassador and foreign worker inside the embassy got priority shots). It's not their problem why?
The embassy prioritizes galas and showmanship more than actually helping citizens. If they cared, they'd be fighting to fix the stupid FBAR situation; you should not be treated like a criminal for having $10k in a bank in the country of your domicile, where you have a home and a family to look after.
Regardless of what you decide there is a 30,000 person waiting list for applications to be processed. They conveniently stopped during the pandemic and even now are processing maybe a dozen a month (all the names are published in the federal register so you can track it yourself).
Most embassies and consulates aren't even taking appointments to process the form: https://uk.usembassy.gov/u-s-citizen-services/citizenship/lo...
“The U.S. Embassy London is currently unable to accept appointments for Loss of Nationality applications.”
No, they are not “unable”, they are unwilling or refusing.
If you aren't paying taxes (aside from sales taxes) you are at some remove leeching. Maybe there's a debate here, maybe you have registered as a resident alien in the places you nome to, but most nomads as I understand it seek to be visitor-status for as long as possible.
I know the digital nomad economy includes people who want to sublet their place to you and then get very upset when you show them you've registered as a resident: It plays both ways.
So by all means cease to be american, but please: pay your taxes wherever you are.
Probably bad idea to drop your passport if you don't have decent alternatives in place
It will be a huge Opportunity Loss. Plus the way the world is shaping up, you will be better off with the country's Economic/Financial/Military Systems behind you.
What support can he expect? under what circumstance? (hint-- it might be less than you think)
If you can replace your American passport with a Canadian, Australian or Singaporean passport, it's not too bad: people from these countries have an easy time getting a visa to work in the US. [0] All while not being subject to American taxes while outside the US.
> Plus the way the world is shaping up, you will be better off with the country's Economic/Financial/Military Systems behind you.
Eh, it's a two-edged sword. On this aspect you are probably better off with the passport of a country that's clearly in the Western sphere, but also one that no-one actually hates. Think Canada or Switzerland.
[0] Though I don't know how well that works for former citizens?
