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I find it interesting how many comments here and on other sites that linked the same article talk about this being tied to concerns around how their tax dollars

I find it interesting how many comments here and on other sites that linked the same article talk about this being tied to concerns around how their tax dollars are spent. It seems many people are not aware that the US is one of only two countries which taxes it's citizens no matter where they reside. Leaving the US is not enough if you wish to avoid taxation, you must also acquire citizenship in another country, and then renounce your US citizenship. Both of those things are much more difficult than they appear at first glance, and renouncing US citizenship has extremely broad and far-reaching consequences. Someone who has renounced their US citizenship is forever barred from ever getting citizenship, and their children are typically also barred from getting citizenship. In addition, they will pretty much always be denied a visa for entry, and they are ineligible for visa at arrival, and may have difficulty to get even pre-applied visas for visiting such as B-1/B-2. If you decide to emigrate elsewhere and renounce your US citizenship to avoid paying taxes, you basically give up on ever coming back to the US ever, and you'll be watched like a hawk by every single US ally. Denouncing your citizenship is a pretty radical move and is something that hallmarks you as the type of person who might go join ISIS or something. This is one reason why it doesn't matter how many people say they want to leave the US, almost none of them actually do it permanently. No matter what, you'll be paying taxes to build bombers, so you might as well enjoy the much higher quality of life on offer in the US while doing so. As someone who has traveled around the world extensively, staying in each place for very extended (months/years) periods of time, I can honestly say that despite all of its flaws, the US is still probably the best place one could possibly live inclusive of all factors. There is a reason we're a net importer of people rather than a net exporter.

PakG1 8y ago
Americans can't declare themselves as non-residents that don't need to pay tax? Canadians who work abroad can do that. And then if they ever move back home, they just have to declare residency again. It's a bit of a process to do both, of course, but it's definitely there. Without this, Canadians who work abroad also get taxed on their global income. Just if you're lucky to work in a country with which Canada has a tax treaty, you don't get double-taxed. You just pay for taxes for the difference on what you would need to have paid in Canada for the same income level if your current country has a lower tax rate.
- CydeWeys 8y ago
  American citizens pay US taxes, full stop. As the comment you're replying to says, this is very unusual among countries. Canada doesn't work the same way. Although you don't get double-taxed, so if you're living anywhere where the tax rate is higher than in the US you pay nothing to the US. If you're living in a tax haven like the Bahamas then you do pay a substantial amount. Even when you're not paying you have to continue filing US tax forms, though, which is annoying and complicated in international tax situations.
- pseudolus 8y ago
  The US has tax treaties with pretty much every country that's a viable destination. [0] Double taxation is not really much of an issue. What is an issue, however, is that there still exists the requirement to file an annual return which can be a pretty expensive proposition over the years, especially if a person is retaining an accountant to handle things (as they should given the complexities of US non-resident citizen returns). [0]: https://www.irs.gov/businesses/international-businesses/united-states-income-tax-treaties-a-to-z https://www.irs.gov/businesses/international-businesses/unit...
arbol 8y ago
How can the US tax foreign income? Presumably they would have no idea about your earnings abroad.
- tcoff91 8y ago
  It’s up to you to report it and it’s a crime not to.
- CydeWeys 8y ago
  Most places you'd want to move to have extradition treaties with the US.
- scottlocklin 8y ago
  Well, you've never lived abroad... Google FACTA some time when you're feeling cheerful for a real downer. The IRS and Treasury basically treating the world wide banking system as their dominion. Expats usually don't renounce because of the worldwide taxation rules (though they don't help); they renounce because of FACTA.
  - amaccuish 8y ago
    > Well, you've never lived abroad Maybe he's not American?
- mixmastamyk 8y ago
  Many countries are now sharing this info, with stiff penalties for non-reporting. It's worth mentioning that this only affects the middle class. There's a 100k deduction on the low end, while the rich have staff to hide the money at the top.
netrap 8y ago
While it is true, isn't only after the first 100K USD or so that you have to pay taxes on??
- CydeWeys 8y ago
  Source?
- tristor 8y ago
  Not exactly. The FEIE limit is $100,800 USD, but you still MUST file a tax return every year, no matter what, and no matter where you reside. It is extremely expensive to file that return and you pretty much must retain an accountant who understands the tax laws of the US for non-residents and your resident country's tax laws. FEIE only covers situations in which you can prove non-residence, and only makes you whole for the amount of difference between the tax you would have paid in the US and the tax you paid in your resident country for that time period. If you make over $100,800 USD, you will need to pay taxes in full to the US in the brackets above that amount, regardless of FEIE. If you make say $135k/yr as a senior engineer for a US company, you will actually pay so much in taxes abroad and to the US, even with FEIE, that it's better to ask for a salary reduction below the $100,800 USD FEIE limit.
  - muzz 8y ago
    If you are working in a high-tax country, like any of the European ones, aren't you paying so much tax to that country that your US tax liability is essentially zero? Due to credit for foreign income taxes paid, separate from FEIE? I.e. if an American moved to Netherlands and made 100k of which 40k went to Dutch taxes, wouldn't they effectively pay $0 in US because the credit for 40k paid to the foreign govt would wipe out the US tax liability (which would have been about $20k depending on status, deductions, etc)
    - tristor 8y ago
      Yes and no. It's actually really complicated. For instance, you can be taxed on earnings against foreign-owned assets, such as stocks, bonds, ETFs, futures, commodities, and ownership in investment real property, which is not excluded from taxation in FEIE. FEIE only affects income tax, not capital gains tax or other forms of taxation. It also does not exempt you from FICA (Medicare, Social Security, et al). So you're working for a US tech company that issued you RSUs and options in the US market, and you also bought an apartment in your foreign country of residence, and you also happened to buy some ETFs once on the London Stock Exchange. Good luck with filing without an accountant or being audited :) Also, have fun ever selling foreign property. Being subject to expatriated taxes means you are automatically ineligible for real estate capital gains exemption. Decide to move to a better apartment and sell your old one in a foreign country? Welp, now you owe capital gains on the sale with no exemptions allowed, even though the transaction had nothing to do with the US in any way. [2] In addition, if you earned over the FEIE limitation, you'd be fully taxed in that bracket by the US AND by your resident country. Some EU member nations have special taxation rules especially for US expats (Germany for instance) thanks to a cozy relationship and a huge number of US foreign nationals living there (civilian employees of the US military, for instance). In general though, you'd be strictly double-taxed on income. You also get no credit against paying VAT, which is a significant tax in the EU. Trust me, I am speaking from experience here, there is nothing at all simple about paying US taxes while living abroad or even filing an accurate return. You're also at higher audit risk. You basically /have/ to hire an expensive accountant (or be lucky enough that the US government supplies/augments one if you're a government employee). Also if you own real property in the United States, you are automatically excluded from being eligible for FEIE. I owned my home in the US while I was abroad, which meant I was never entitled to FEIE unless I transferred the property into ownership of a trust (like a REIT) or sold it. If I moved it into a trust, I'd have to pay taxes off any gains made and those would not be excluded and do not have to be fully realized to be taxable in some scenarios. Taxes are really really really complicated in general, and US taxes are bonkers stupid complicated. And then there's FATCA, so good luck even trying to get away not filing a return or dealing with this situation [1]. Basically, the short answer is if you are a US citizen and you move abroad, be ready to get shafted hard by the IRS and also pay extensively for the privilege of telling them how hard to shaft you. [1]: https://www.usexpattaxhelp.com/us-american-expats-what-%20is-fatca.php https://www.usexpattaxhelp.com/us-american-expats-what-%20is... [2]: https://www.nerdwallet.com/blog/taxes/selling-home-capital-gains-tax/ https://www.nerdwallet.com/blog/taxes/selling-home-capital-g... P.S.: Sorry about all the edits in a short amount of time. I kept finding more things I thought needed to be said. I'll leave this response alone now.
tcoff91 8y ago
I was under the impression that you only pay taxes to USA while living abroad if you move somewhere with lower income taxation than the USA, in which case you deduct the taxes paid to the other government from US taxes and pay the difference. This means most people don’t have to pay taxes to the USA while abroad because most countries tax you more than USA federal income tax rates.
- tristor 8y ago
  That is not how it works. No matter where you reside, you MUST file a tax return every year. There is something called the Foreign Earned Income Exemption (FEIE), which is relatively significant but only applies to the first $100,800 USD to earned that year, and does not apply to limits on taxation against foreign owned assets. If you are making a senior engineer salary at a US company but living abroad, you will be taxed quite heavily since you'll need to pay taxes in your country of residence, plus be taxed on income at the higher brackets over $100k in the US.
  - MichaelGlass 8y ago
    From your other comments it seems like you're well versed in this stuff, but here there's some missing nuance. Most countries have double taxation treaties. 1. If the tax rate is lower in your host country, you pay tax on income greater than 100K minus whatever tax you paid in your host country. Let's call the US tax rate 35 and the host country 30%, and your income 110: You pay 5% to the US, e.g. 500 USD (plus, probably a similar amount to a tax advisor) 2. If the tax rate is higher in your host country, you deduct your host countries taxes from your US tax and only pay the tax advisor.
dvdhnt 8y ago
> Someone who has renounced their US citizenship is forever barred from ever getting citizenship, and their children are typically also barred from getting citizenship. In addition, they will pretty much always be denied a visa for entry, and they are ineligible for visa at arrival, and may have difficulty to get even pre-applied visas for visiting such as B-1/B-2. This does not appear to be true, can you provide sources? The State department's website makes it clear that you'll be treated as any other "foreigner", and a Google search shows plenty of articles noting that while _near impossible_, there is at least a possibility you can regain citizenship - but you'll be competing against the entire world. Also, your children can get their citizenship if they were born in the U.S., as long as they apply within 6 months of their 18th birthday. https://travel.state.gov/content/travel/en/legal/travel-legal-considerations/us-citizenship/Renunciaton-USCitizenship-persons-claiming-right-residence.html https://travel.state.gov/content/travel/en/legal/travel-lega...
- tristor 8y ago
  I don't have a documented source, it's based on conversations I had at one point with State Department officials when I considered permanently emigrating to a country I'd lived in (In the EU) for a number of years. I wanted to avoid being double-taxed, since the FEIE wasn't sufficient to make me whole. I ended up moving back to the US (for non-economic reasons). The thing you need to understand is that the State Department/US Government has extremely broad leeway under the law in how they process citizenship applications. What the letter of the law says is almost meaningless, what matters is that you get 1) Lucky, and 2) Don't have black marks against you. Denouncing your US Citizenship is basically the ultimate black mark, and you are frankly never getting past it unless you are personal friends with the President or something.
idoubtit 8y ago
> [...] the US is still probably the best place one could possibly live inclusive of all factors. There is a reason we're a net importer of people rather than a net exporter. The first sentence is a highly subjective opinion, and the second one is biased. I'll try to bring some (factual) dissonance. Most immigrants into the USA come from Latin America and Asia. I haven't found recent immigration balances between the USA and other rich countries, but I doubt it would always be a net import to the US, especially if one considers permanent immigration. For instance, more American citizens (120k) live in Australia than the contrary (90k). As for the USA being the best place to live, it's surely not based on life expectancy. Even the CIA world facts ranks the country after the 40th position, with many English speaking counties better ranked. The obesity rate of 39% is probably the largest factor of this lower quality of life. Now for a subjective opinion, I like my way of life because I live in a town where I can walk/run to the nearest mountain in half an hour, I go to work on a bicycle-only road, I buy fresh food in a nearby open-air market where farmers sell their own production, I only use my car on week-ends... Many countries offer all this, but I suspect few places in the USA could compare. And when I went to dentist this morning, I did not even bring my wallet, because I knew that, like almost everyone in the country, I don't have to pay for basic care.

PakG1 8y ago

Americans can't declare themselves as non-residents that don't need to pay tax? Canadians who work abroad can do that. And then if they ever move back home, they just have to declare residency again. It's a bit of a process to do both, of course, but it's definitely there. Without this, Canadians who work abroad also get taxed on their global income. Just if you're lucky to work in a country with which Canada has a tax treaty, you don't get double-taxed. You just pay for taxes for the difference on what you would need to have paid in Canada for the same income level if your current country has a lower tax rate.

CydeWeys 8y ago
American citizens pay US taxes, full stop. As the comment you're replying to says, this is very unusual among countries. Canada doesn't work the same way. Although you don't get double-taxed, so if you're living anywhere where the tax rate is higher than in the US you pay nothing to the US. If you're living in a tax haven like the Bahamas then you do pay a substantial amount. Even when you're not paying you have to continue filing US tax forms, though, which is annoying and complicated in international tax situations.
pseudolus 8y ago
The US has tax treaties with pretty much every country that's a viable destination. [0] Double taxation is not really much of an issue. What is an issue, however, is that there still exists the requirement to file an annual return which can be a pretty expensive proposition over the years, especially if a person is retaining an accountant to handle things (as they should given the complexities of US non-resident citizen returns). [0]: https://www.irs.gov/businesses/international-businesses/united-states-income-tax-treaties-a-to-z https://www.irs.gov/businesses/international-businesses/unit...

arbol 8y ago

How can the US tax foreign income? Presumably they would have no idea about your earnings abroad.

tcoff91 8y ago
It’s up to you to report it and it’s a crime not to.
CydeWeys 8y ago
Most places you'd want to move to have extradition treaties with the US.
scottlocklin 8y ago
Well, you've never lived abroad... Google FACTA some time when you're feeling cheerful for a real downer. The IRS and Treasury basically treating the world wide banking system as their dominion. Expats usually don't renounce because of the worldwide taxation rules (though they don't help); they renounce because of FACTA.
- amaccuish 8y ago
  > Well, you've never lived abroad Maybe he's not American?
mixmastamyk 8y ago
Many countries are now sharing this info, with stiff penalties for non-reporting. It's worth mentioning that this only affects the middle class. There's a 100k deduction on the low end, while the rich have staff to hide the money at the top.

netrap 8y ago

While it is true, isn't only after the first 100K USD or so that you have to pay taxes on??

CydeWeys 8y ago
Source?
tristor 8y ago
Not exactly. The FEIE limit is $100,800 USD, but you still MUST file a tax return every year, no matter what, and no matter where you reside. It is extremely expensive to file that return and you pretty much must retain an accountant who understands the tax laws of the US for non-residents and your resident country's tax laws. FEIE only covers situations in which you can prove non-residence, and only makes you whole for the amount of difference between the tax you would have paid in the US and the tax you paid in your resident country for that time period. If you make over $100,800 USD, you will need to pay taxes in full to the US in the brackets above that amount, regardless of FEIE. If you make say $135k/yr as a senior engineer for a US company, you will actually pay so much in taxes abroad and to the US, even with FEIE, that it's better to ask for a salary reduction below the $100,800 USD FEIE limit.
- muzz 8y ago
  If you are working in a high-tax country, like any of the European ones, aren't you paying so much tax to that country that your US tax liability is essentially zero? Due to credit for foreign income taxes paid, separate from FEIE? I.e. if an American moved to Netherlands and made 100k of which 40k went to Dutch taxes, wouldn't they effectively pay $0 in US because the credit for 40k paid to the foreign govt would wipe out the US tax liability (which would have been about $20k depending on status, deductions, etc)
  - tristor 8y ago
    Yes and no. It's actually really complicated. For instance, you can be taxed on earnings against foreign-owned assets, such as stocks, bonds, ETFs, futures, commodities, and ownership in investment real property, which is not excluded from taxation in FEIE. FEIE only affects income tax, not capital gains tax or other forms of taxation. It also does not exempt you from FICA (Medicare, Social Security, et al). So you're working for a US tech company that issued you RSUs and options in the US market, and you also bought an apartment in your foreign country of residence, and you also happened to buy some ETFs once on the London Stock Exchange. Good luck with filing without an accountant or being audited :) Also, have fun ever selling foreign property. Being subject to expatriated taxes means you are automatically ineligible for real estate capital gains exemption. Decide to move to a better apartment and sell your old one in a foreign country? Welp, now you owe capital gains on the sale with no exemptions allowed, even though the transaction had nothing to do with the US in any way. [2] In addition, if you earned over the FEIE limitation, you'd be fully taxed in that bracket by the US AND by your resident country. Some EU member nations have special taxation rules especially for US expats (Germany for instance) thanks to a cozy relationship and a huge number of US foreign nationals living there (civilian employees of the US military, for instance). In general though, you'd be strictly double-taxed on income. You also get no credit against paying VAT, which is a significant tax in the EU. Trust me, I am speaking from experience here, there is nothing at all simple about paying US taxes while living abroad or even filing an accurate return. You're also at higher audit risk. You basically /have/ to hire an expensive accountant (or be lucky enough that the US government supplies/augments one if you're a government employee). Also if you own real property in the United States, you are automatically excluded from being eligible for FEIE. I owned my home in the US while I was abroad, which meant I was never entitled to FEIE unless I transferred the property into ownership of a trust (like a REIT) or sold it. If I moved it into a trust, I'd have to pay taxes off any gains made and those would not be excluded and do not have to be fully realized to be taxable in some scenarios. Taxes are really really really complicated in general, and US taxes are bonkers stupid complicated. And then there's FATCA, so good luck even trying to get away not filing a return or dealing with this situation [1]. Basically, the short answer is if you are a US citizen and you move abroad, be ready to get shafted hard by the IRS and also pay extensively for the privilege of telling them how hard to shaft you. [1]: https://www.usexpattaxhelp.com/us-american-expats-what-%20is-fatca.php https://www.usexpattaxhelp.com/us-american-expats-what-%20is... [2]: https://www.nerdwallet.com/blog/taxes/selling-home-capital-gains-tax/ https://www.nerdwallet.com/blog/taxes/selling-home-capital-g... P.S.: Sorry about all the edits in a short amount of time. I kept finding more things I thought needed to be said. I'll leave this response alone now.

tcoff91 8y ago

I was under the impression that you only pay taxes to USA while living abroad if you move somewhere with lower income taxation than the USA, in which case you deduct the taxes paid to the other government from US taxes and pay the difference. This means most people don’t have to pay taxes to the USA while abroad because most countries tax you more than USA federal income tax rates.

tristor 8y ago
That is not how it works. No matter where you reside, you MUST file a tax return every year. There is something called the Foreign Earned Income Exemption (FEIE), which is relatively significant but only applies to the first $100,800 USD to earned that year, and does not apply to limits on taxation against foreign owned assets. If you are making a senior engineer salary at a US company but living abroad, you will be taxed quite heavily since you'll need to pay taxes in your country of residence, plus be taxed on income at the higher brackets over $100k in the US.
- MichaelGlass 8y ago
  From your other comments it seems like you're well versed in this stuff, but here there's some missing nuance. Most countries have double taxation treaties. 1. If the tax rate is lower in your host country, you pay tax on income greater than 100K minus whatever tax you paid in your host country. Let's call the US tax rate 35 and the host country 30%, and your income 110: You pay 5% to the US, e.g. 500 USD (plus, probably a similar amount to a tax advisor) 2. If the tax rate is higher in your host country, you deduct your host countries taxes from your US tax and only pay the tax advisor.

dvdhnt 8y ago

> Someone who has renounced their US citizenship is forever barred from ever getting citizenship, and their children are typically also barred from getting citizenship. In addition, they will pretty much always be denied a visa for entry, and they are ineligible for visa at arrival, and may have difficulty to get even pre-applied visas for visiting such as B-1/B-2. This does not appear to be true, can you provide sources? The State department's website makes it clear that you'll be treated as any other "foreigner", and a Google search shows plenty of articles noting that while _near impossible_, there is at least a possibility you can regain citizenship - but you'll be competing against the entire world. Also, your children can get their citizenship if they were born in the U.S., as long as they apply within 6 months of their 18th birthday. https://travel.state.gov/content/travel/en/legal/travel-legal-considerations/us-citizenship/Renunciaton-USCitizenship-persons-claiming-right-residence.html https://travel.state.gov/content/travel/en/legal/travel-lega...

tristor 8y ago
I don't have a documented source, it's based on conversations I had at one point with State Department officials when I considered permanently emigrating to a country I'd lived in (In the EU) for a number of years. I wanted to avoid being double-taxed, since the FEIE wasn't sufficient to make me whole. I ended up moving back to the US (for non-economic reasons). The thing you need to understand is that the State Department/US Government has extremely broad leeway under the law in how they process citizenship applications. What the letter of the law says is almost meaningless, what matters is that you get 1) Lucky, and 2) Don't have black marks against you. Denouncing your US Citizenship is basically the ultimate black mark, and you are frankly never getting past it unless you are personal friends with the President or something.

idoubtit 8y ago

> [...] the US is still probably the best place one could possibly live inclusive of all factors. There is a reason we're a net importer of people rather than a net exporter. The first sentence is a highly subjective opinion, and the second one is biased. I'll try to bring some (factual) dissonance. Most immigrants into the USA come from Latin America and Asia. I haven't found recent immigration balances between the USA and other rich countries, but I doubt it would always be a net import to the US, especially if one considers permanent immigration. For instance, more American citizens (120k) live in Australia than the contrary (90k). As for the USA being the best place to live, it's surely not based on life expectancy. Even the CIA world facts ranks the country after the 40th position, with many English speaking counties better ranked. The obesity rate of 39% is probably the largest factor of this lower quality of life. Now for a subjective opinion, I like my way of life because I live in a town where I can walk/run to the nearest mountain in half an hour, I go to work on a bicycle-only road, I buy fresh food in a nearby open-air market where farmers sell their own production, I only use my car on week-ends... Many countries offer all this, but I suspect few places in the USA could compare. And when I went to dentist this morning, I did not even bring my wallet, because I knew that, like almost everyone in the country, I don't have to pay for basic care.