7 ms·

Many don't keep their US passport even if they can to avoid paying tax.

doktrin 9y ago
US worldwide taxation is incredibly obnoxious, but the benefits of keeping a US passport still outweigh the drawbacks for many. That's not guaranteed to last forever, though.
- Dolores12 9y ago
  What are benefits?
  - codewithcheese 9y ago
    You can become the POTUS!
  - Symbiote 9y ago
    Being able to return to the USA, and visa-free access to more/different countries compared to the new citizenship. Renouncing American citizenship is extremely rare, as these figures show. The taxation is a paperwork hassle, but you need a very high income to actually owe anything -- for most, the higher tax rate in the new country offsets the American tax due.
    - Dolores12 9y ago
      So you call it benefit - paying 30%+ of your income in taxes worldwide instead of paying 20$ for visa on arrival? That makes no sense.
      - tryingagainbro 9y ago
        You will (probably) NOT get another visa to USA if you renounce for taxes.
        Symbiote 9y ago
        I would presume it's no problem if you actually paid any owed taxes.
        tryingagainbro 9y ago
        If they determined you did for taxes, it's a no-no: Former U.S. citizens would be required to obtain a visa to travel to the United States or show that they are eligible for admission pursuant to the terms of the Visa Waiver Program. If unable to qualify for a visa, the person could be permanently barred from entering the United States. If the Department of Homeland Security determines that the renunciation is motivated by tax avoidance purposes, the individual will be found inadmissible to the United States under Section 212(a)(10)(E) of the Immigration and Nationality Act (8 U.S.C. 1182(a)(10)(E)), as amended. https://travel.state.gov/content/travel/en/legal-considerations/us-citizenship-laws-policies/renunciation-of-citizenship.html https://travel.state.gov/content/travel/en/legal-considerati...
        kogepathic 9y ago
        You cannot/shouldn't renounce your US citizenship for tax reasons. [0] Every piece of advice you read from anyone online will say the same thing: if you must give a reason for expatriation (and you don't have to), say anything but taxes. You don't officially have to give a reason to renounce, but consular officials might ask you verbally for your reasons. You are not required to give one though. You have the option to include a written statement, but I'm not sure why you'd ever want to take it (unless you really want to give them additional reasons to deny you entry). [0] https://en.wikipedia.org/wiki/Reed_Amendment_(immigration) https://en.wikipedia.org/wiki/Reed_Amendment_(immigration)
      - Symbiote 9y ago
        You need to be earning over $100,000 a year, and live in a country where local tax is lower than in the USA. That's not especially common. Further details: https://www.americansabroad.org/us-taxes-abroad-for-dummies-update/ https://www.americansabroad.org/us-taxes-abroad-for-dummies-... (I'm not American, but none of several close friends in Europe with dual US/something-EU citizenship have given up their American citizenship.)
        nvarsj 9y ago
        It gets WAY more complex if you don't have a standard salary job. Even if you don't make over 100K a year. E.g. small business owner expat is in for a world of pain, stress, and audit.
      - cr1895 9y ago
        >paying 30%+ of your income in taxes worldwide This is a big misunderstanding of US taxation. Every US citizen must file their taxes on income earned anywhere in the world, even if not earned in the US. However, for most people, it is very unlikely to actually pay any additional tax to the US government. https://www.irs.gov/individuals/international-taxpayers/u-s-citizens-and-resident-aliens-abroad" https://www.irs.gov/individuals/international-taxpayers/u-s-... "Your worldwide income is subject to U.S. income tax, regardless of where you reside." But there's the foreign earned income exclusion: https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion https://www.irs.gov/individuals/international-taxpayers/fore...
        seanmcdirmid 9y ago
        After you make $100k, there is also the foreign tax credit. In most countries, you don't need to bother with the foreign earned income exclusion unless you are not paying tax at all.
        beagle3 9y ago
        If you have any kind of saving or investment outside the us, say, a pension fund or a mutual fund, then you do owe quite a bit even if you live in the US (more if you don't). Almost all of these investments/funds are a PFIC by US rules, which means a world of pain - to the point that over 20 years you are likely to have to pay more in taxes than however much money you have there.
      - pc86 9y ago
        I don't think you understand how taxes work. US tax rates are marginal, so for your effective tax rate to be 30% you'd probably be earning several million dollars in payroll. Very unlikely. Not to mention the fact that if you're an expat, income tax paid in your country of residence counts toward your US tax obligation. If you live somewhere with higher taxes, you owe the US nothing. If you live somewhere with lower taxes, you owe only the difference.
  - maehwasu 9y ago
    Speaking as a wealthy person who has considered expatriating, the US is REALLY nice relative to almost anywhere in the world if you have a lot of money. There are also activities like piloting your own planes, using wide-open spaces, etc, that are much more regulated and hard to enjoy in other places. US is also really fun for girls/partying if you have money. 30%+ of your income down the drain sucks a lot, but past a certain point in net worth it becomes somewhat attractive. Same reason people live in California even with the insane tax burden--it's really really freaking nice.
    - point78 9y ago
      >US is also really fun for girls/partying if you have money You have got to be visiting the wrong countries (North Korea?) Literally anywhere I've been outside the US is a hell of a lot more fun for girls/partying than the US. And that's an understatement.
      - ForRealsies 9y ago
        Mass generalizations vs. mass generalizations. Quality debate guys.
      - stagbeetle 9y ago
        This is true in the general sense, but I think he might be talking about sugar babies.
  - doktrin 9y ago
    For starters, easy access to one of the largest (and in many cases highest paying) job markets in the world. Secondarily, a high quality fallback in the event of significant geopolitical or environmental changes in ones new host country. In the hypothetical scenario where an emigrant from the US is 100% determined to never return, and who also is confident in the long term stability of their new host nation - then the inconveniences of yearly tax paperwork might outweigh the benefits. However, I think that's more of a corner case than not as evidenced by the fact that the vast majority of emigrants choose to retain their US passport.
    - deleted 9y ago
      [deleted]
- eloisant 9y ago
  If I'm correct you only have to do a federal tax return (not state) and you have a tax credit equal to what you paid in your residence country. So yes, I understand filling a tax return is a chore, but you'll only pay taxes if the amount you paid in your residence country is lower that what you would have paid in federal taxes alone. Considering how low US income tax is, in most countries you won't have to pay anything.
  - doktrin 9y ago
    From what I understand, that's mostly true. However, describing it as a simple 'tax return' is probably understating the complexity. Like someone else pointed out further down in the thread, a small business owner "is in for a world of pain, stress and audit". Likewise, income from investments can be massively annoying to file for correctly.
  - pc86 9y ago
    > how low US income tax is Compared to what? The maximum federal rate is nearly 40%. Yes, there are many many countries with maximum rates in the 50-60% range. But 40%, even marginal, is not low.
    - etherael 9y ago
      It's extremely high. https://en.wikipedia.org/wiki/List_of_countries_by_tax_rates https://en.wikipedia.org/wiki/List_of_countries_by_tax_rates Sort by max individual rate, it's 8th from the top in a list 221 countries long.
      - pc86 9y ago
        Only if you include state rates, which is.. disingenuous at best. It's at least as wrong as saying the US has very low tax rates. If you're talking about expatriation, the IRS, etc, you're only talking about Federal rates. Short of outlawing income tax the Federal government has very little power over dictating state tax rates. At the Federal level personal taxation is not terrible but it's not low, either. The US has the second higher corporate income tax in the world according to that same chart, and the highest depending on your state of incorporation/operation (if you include state/local).
TorKlingberg 9y ago
Some do, but not that many. Having a US passport is useful. You can discount the income tax already paid in an other country, so (other than the hassle of filing) it mostly affect people with very high income or who work in countries like Dubai without an income tax.
mikeash 9y ago
At single-digit thousands per year, I don't know if I'd describe that as "many."

US worldwide taxation is incredibly obnoxious, but the benefits of keeping a US passport still outweigh the drawbacks for many. That's not guaranteed to last forever, though.

Dolores12 9y ago
What are benefits?
- codewithcheese 9y ago
  You can become the POTUS!
- Symbiote 9y ago
  Being able to return to the USA, and visa-free access to more/different countries compared to the new citizenship. Renouncing American citizenship is extremely rare, as these figures show. The taxation is a paperwork hassle, but you need a very high income to actually owe anything -- for most, the higher tax rate in the new country offsets the American tax due.
  - Dolores12 9y ago
    So you call it benefit - paying 30%+ of your income in taxes worldwide instead of paying 20$ for visa on arrival? That makes no sense.
    - tryingagainbro 9y ago
      You will (probably) NOT get another visa to USA if you renounce for taxes.
      - Symbiote 9y ago
        I would presume it's no problem if you actually paid any owed taxes.
        tryingagainbro 9y ago
        If they determined you did for taxes, it's a no-no: Former U.S. citizens would be required to obtain a visa to travel to the United States or show that they are eligible for admission pursuant to the terms of the Visa Waiver Program. If unable to qualify for a visa, the person could be permanently barred from entering the United States. If the Department of Homeland Security determines that the renunciation is motivated by tax avoidance purposes, the individual will be found inadmissible to the United States under Section 212(a)(10)(E) of the Immigration and Nationality Act (8 U.S.C. 1182(a)(10)(E)), as amended. https://travel.state.gov/content/travel/en/legal-considerations/us-citizenship-laws-policies/renunciation-of-citizenship.html https://travel.state.gov/content/travel/en/legal-considerati...
      - kogepathic 9y ago
        You cannot/shouldn't renounce your US citizenship for tax reasons. [0] Every piece of advice you read from anyone online will say the same thing: if you must give a reason for expatriation (and you don't have to), say anything but taxes. You don't officially have to give a reason to renounce, but consular officials might ask you verbally for your reasons. You are not required to give one though. You have the option to include a written statement, but I'm not sure why you'd ever want to take it (unless you really want to give them additional reasons to deny you entry). [0] https://en.wikipedia.org/wiki/Reed_Amendment_(immigration) https://en.wikipedia.org/wiki/Reed_Amendment_(immigration)
    - Symbiote 9y ago
      You need to be earning over $100,000 a year, and live in a country where local tax is lower than in the USA. That's not especially common. Further details: https://www.americansabroad.org/us-taxes-abroad-for-dummies-update/ https://www.americansabroad.org/us-taxes-abroad-for-dummies-... (I'm not American, but none of several close friends in Europe with dual US/something-EU citizenship have given up their American citizenship.)
      - nvarsj 9y ago
        It gets WAY more complex if you don't have a standard salary job. Even if you don't make over 100K a year. E.g. small business owner expat is in for a world of pain, stress, and audit.
    - cr1895 9y ago
      >paying 30%+ of your income in taxes worldwide This is a big misunderstanding of US taxation. Every US citizen must file their taxes on income earned anywhere in the world, even if not earned in the US. However, for most people, it is very unlikely to actually pay any additional tax to the US government. https://www.irs.gov/individuals/international-taxpayers/u-s-citizens-and-resident-aliens-abroad" https://www.irs.gov/individuals/international-taxpayers/u-s-... "Your worldwide income is subject to U.S. income tax, regardless of where you reside." But there's the foreign earned income exclusion: https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion https://www.irs.gov/individuals/international-taxpayers/fore...
      - seanmcdirmid 9y ago
        After you make $100k, there is also the foreign tax credit. In most countries, you don't need to bother with the foreign earned income exclusion unless you are not paying tax at all.
      - beagle3 9y ago
        If you have any kind of saving or investment outside the us, say, a pension fund or a mutual fund, then you do owe quite a bit even if you live in the US (more if you don't). Almost all of these investments/funds are a PFIC by US rules, which means a world of pain - to the point that over 20 years you are likely to have to pay more in taxes than however much money you have there.
    - pc86 9y ago
      I don't think you understand how taxes work. US tax rates are marginal, so for your effective tax rate to be 30% you'd probably be earning several million dollars in payroll. Very unlikely. Not to mention the fact that if you're an expat, income tax paid in your country of residence counts toward your US tax obligation. If you live somewhere with higher taxes, you owe the US nothing. If you live somewhere with lower taxes, you owe only the difference.
- maehwasu 9y ago
  Speaking as a wealthy person who has considered expatriating, the US is REALLY nice relative to almost anywhere in the world if you have a lot of money. There are also activities like piloting your own planes, using wide-open spaces, etc, that are much more regulated and hard to enjoy in other places. US is also really fun for girls/partying if you have money. 30%+ of your income down the drain sucks a lot, but past a certain point in net worth it becomes somewhat attractive. Same reason people live in California even with the insane tax burden--it's really really freaking nice.
  - point78 9y ago
    >US is also really fun for girls/partying if you have money You have got to be visiting the wrong countries (North Korea?) Literally anywhere I've been outside the US is a hell of a lot more fun for girls/partying than the US. And that's an understatement.
    - ForRealsies 9y ago
      Mass generalizations vs. mass generalizations. Quality debate guys.
    - stagbeetle 9y ago
      This is true in the general sense, but I think he might be talking about sugar babies.
- doktrin 9y ago
  For starters, easy access to one of the largest (and in many cases highest paying) job markets in the world. Secondarily, a high quality fallback in the event of significant geopolitical or environmental changes in ones new host country. In the hypothetical scenario where an emigrant from the US is 100% determined to never return, and who also is confident in the long term stability of their new host nation - then the inconveniences of yearly tax paperwork might outweigh the benefits. However, I think that's more of a corner case than not as evidenced by the fact that the vast majority of emigrants choose to retain their US passport.
  - deleted 9y ago
    [deleted]
eloisant 9y ago
If I'm correct you only have to do a federal tax return (not state) and you have a tax credit equal to what you paid in your residence country. So yes, I understand filling a tax return is a chore, but you'll only pay taxes if the amount you paid in your residence country is lower that what you would have paid in federal taxes alone. Considering how low US income tax is, in most countries you won't have to pay anything.
- doktrin 9y ago
  From what I understand, that's mostly true. However, describing it as a simple 'tax return' is probably understating the complexity. Like someone else pointed out further down in the thread, a small business owner "is in for a world of pain, stress and audit". Likewise, income from investments can be massively annoying to file for correctly.
- pc86 9y ago
  > how low US income tax is Compared to what? The maximum federal rate is nearly 40%. Yes, there are many many countries with maximum rates in the 50-60% range. But 40%, even marginal, is not low.
  - etherael 9y ago
    It's extremely high. https://en.wikipedia.org/wiki/List_of_countries_by_tax_rates https://en.wikipedia.org/wiki/List_of_countries_by_tax_rates Sort by max individual rate, it's 8th from the top in a list 221 countries long.
    - pc86 9y ago
      Only if you include state rates, which is.. disingenuous at best. It's at least as wrong as saying the US has very low tax rates. If you're talking about expatriation, the IRS, etc, you're only talking about Federal rates. Short of outlawing income tax the Federal government has very little power over dictating state tax rates. At the Federal level personal taxation is not terrible but it's not low, either. The US has the second higher corporate income tax in the world according to that same chart, and the highest depending on your state of incorporation/operation (if you include state/local).

TorKlingberg 9y ago

Some do, but not that many. Having a US passport is useful. You can discount the income tax already paid in an other country, so (other than the hassle of filing) it mostly affect people with very high income or who work in countries like Dubai without an income tax.

mikeash 9y ago

At single-digit thousands per year, I don't know if I'd describe that as "many."