4 ms·

Can an expat/tax guru shed some light onto how that whole tax thing works? Do you pay local tax + US federal tax, or something?

by markbao 17y ago

david927 17y ago
You pay the taxes of the country you're in, and also U.S. taxes. Now you have some write-offs, such as the Foreign Earned Income exemption and you can write off the resident country's taxes, but it's still expensive -- and going to services you're by definition not using.
- DougWebb 17y ago
  There are also tax treaties with some countries that can reduce the burden. For example, as a NJ resident who works in NY I only pay taxes to the jurisdiction that wants more (which is NY) because of an agreement between the states. I'm pretty sure there is a similar agreement between the US and Canada, where the US gets the income tax while Canada gets all of the sales tax.
  - jleyank 17y ago
    There is a US/Canada arrangement. While I must file US taxes each year, I pay nothing - there is the Foreign Income exclusion, and there is also a foreign tax credit. So, unless you live in a country with lower taxes than the US you end up with no net tax.
ahoyhere 17y ago
Living in Austria, I have to pay the total of my Austrian taxes... but the US gets first cut. So if I theoretically owe $25,000 to Austria total, but $20,000 to the US, I pay the US the $20k and Austria gets $5k. Even though I get awesome healthcare and other social services from Austria. Basically, it's the world's shittiest deal.
- confuzatron 17y ago
  That's deeply strange. Presumably Austria, or the EU, have an agreement with the US that allows this to happen. On the face of it, you're saying to the Austrian government "I know I earn X of your Earth Euros, but I'm going to be sending a large chunk of that out of the country, tax-free, mkay?".
- starkfist 17y ago
  This sounds deeply wrong, unless Austria has an odd arrangement with the USA. It is not like this in Japan or Australia. In many countries, taxes are automatically deducted and it would be impractical if not impossible to give the USA first cut. Also, if you get residency in a state with no income tax and form a corporation in the USA you can pay yourself below the foreign earned income exclusion and for most practical purposes owe the USA nothing. I would get a second opinion from a different tax specialist.
holdenc 17y ago
The Foreign Earned Income tax credit if $91,500 for 2009. But more than likely you'll still be on the hook for Social Security and Medicare (depending on the country) so you'll likely be paying a minimum of 15% tax. Anything over the $91,500 gets taxed as if earned in the normal US tax bracket. So if you happen to be running a successful business abroad, get ready to pay the US dearly.

Can an expat/tax guru shed some light onto how that whole tax thing works? Do you pay local tax + US federal tax, or something?

by markbao 17y ago

Can an expat/tax guru shed some light onto how that whole tax thing works? Do you pay local tax + US federal tax, or something?

david927 17y ago

You pay the taxes of the country you're in, and also U.S. taxes. Now you have some write-offs, such as the Foreign Earned Income exemption and you can write off the resident country's taxes, but it's still expensive -- and going to services you're by definition not using.

DougWebb 17y ago
There are also tax treaties with some countries that can reduce the burden. For example, as a NJ resident who works in NY I only pay taxes to the jurisdiction that wants more (which is NY) because of an agreement between the states. I'm pretty sure there is a similar agreement between the US and Canada, where the US gets the income tax while Canada gets all of the sales tax.
- jleyank 17y ago
  There is a US/Canada arrangement. While I must file US taxes each year, I pay nothing - there is the Foreign Income exclusion, and there is also a foreign tax credit. So, unless you live in a country with lower taxes than the US you end up with no net tax.

ahoyhere 17y ago

Living in Austria, I have to pay the total of my Austrian taxes... but the US gets first cut. So if I theoretically owe $25,000 to Austria total, but $20,000 to the US, I pay the US the $20k and Austria gets $5k. Even though I get awesome healthcare and other social services from Austria. Basically, it's the world's shittiest deal.

confuzatron 17y ago
That's deeply strange. Presumably Austria, or the EU, have an agreement with the US that allows this to happen. On the face of it, you're saying to the Austrian government "I know I earn X of your Earth Euros, but I'm going to be sending a large chunk of that out of the country, tax-free, mkay?".
starkfist 17y ago
This sounds deeply wrong, unless Austria has an odd arrangement with the USA. It is not like this in Japan or Australia. In many countries, taxes are automatically deducted and it would be impractical if not impossible to give the USA first cut. Also, if you get residency in a state with no income tax and form a corporation in the USA you can pay yourself below the foreign earned income exclusion and for most practical purposes owe the USA nothing. I would get a second opinion from a different tax specialist.

holdenc 17y ago

The Foreign Earned Income tax credit if $91,500 for 2009. But more than likely you'll still be on the hook for Social Security and Medicare (depending on the country) so you'll likely be paying a minimum of 15% tax. Anything over the $91,500 gets taxed as if earned in the normal US tax bracket. So if you happen to be running a successful business abroad, get ready to pay the US dearly.