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Does your Japanese permanent residency allow you to avoid paying American income tax, or are you still required to pay BOTH Japanese and American income taxes?

robjan 6y ago
You still have to pay tax unless you renounce your US nationality.
- jkinudsjknds 6y ago
  Foreign taxes are deductible though, so it's more of a max
- corey_moncure 6y ago
  You may still have to pay tax even if you renounce your US nationality, if the IRS finds that you have renounced your nationality so that you don't have to pay taxes anymore.
  - theCodeStig 6y ago
    Could you elaborate on that, please?
    - corey_moncure 6y ago
      "The expatriation tax provisions under Internal Revenue Code (IRC) sections 877 and 877A apply to U.S. citizens who have renounced their citizenship and long-term residents (as defined in IRC 877(e)) who have ended their U.S. resident status for federal tax purposes." https://www.irs.gov/individuals/international-taxpayers/expatriation-tax https://www.irs.gov/individuals/international-taxpayers/expa...
CapricornNoble 6y ago
As long as you are a US citizen you are expected to pay Federal income tax, no matter where you are in the world, and no matter where you earned it. The US and Eritrea are the only 2 countries on the planet with this policy. I think you can get your tax burden reduced if you can prove you've paid taxes to another jurisdiction, but don't quote me on that...
- komali2 6y ago
  You're expected to report your income to the Fed but last time I worked abroad I didn't owe taxes cause I made under some number, I think it was 100k?
- pheug 6y ago
  Also Hungary and Myanmar if wikipedia to be trusted https://en.wikipedia.org/wiki/International_taxation https://en.wikipedia.org/wiki/International_taxation And there are talks in the air that other countries might follow the suit to buff up their state coffers - https://nomadcapitalist.com/2020/05/12/citizenship-based-taxation-in-canada/ https://nomadcapitalist.com/2020/05/12/citizenship-based-tax...
- jcranmer 6y ago
  You do get a foreign tax credit. There is also a foreign income inclusion that lets you avoid all taxes, but it comes with some severe restrictions (including not being in the US for more than ~30 days in any 365-day period).
- hopia 6y ago
  Actually, I think Japan also technically taxes worldwide income of non-resident nationals. And even permanent residents, regardless of where they reside. Moreover, some countries like Finland require you to pay taxes on worldwide income for a number of years after you're no longer a resident of the country and only then granting you tax freedom from income sourced outside of the country. And there's no amount of income you can exclude like the USA's $108k or whatever the figure is currently.
mattr47 6y ago
US has had the federal tax exclusion limit. As long as you are living outside the US for longer than 330 days a year, the first $110k of foreign earned income is tax free.
deleted 6y ago
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- deleted 6y ago
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aikinai 6y ago
America taxes citizens regardless of residence, but there’s a treaty so you can credit all taxes paid to Japan and you only end up paying the higher of the two.
monocasa 6y ago
You have to pay the difference in income taxes to the US if the nonUS income taxes are lower than US.
microtherion 6y ago
You're required to file taxes in both countries, but the taxes are not additive. Basically, you have to pay the regular taxes in your country of residency, and then pay the US any difference to what you'd have paid in the US.
- 627467 6y ago
  ...if a tax treaty between both countries exists.
  - jkaplowitz 6y ago
    Or if the foreign tax credit or foreign earned income exclusion aspects of US tax law serve the same purpose as the treaty would. And the treaties often have gaps or gotchas, though they help a lot. (I'm an American in Canada, so I've had to become familiar with all of the above as applied to my case.)
estebank 6y ago
The only way to avoid having to file American taxes as an American is to stop being one, to give up your citizenship. Doing so makes you pay a punitive exit tax on all you assets as if you had sold them. Before going down that route, keep in mind that you are obliged to file taxes on your global earnings, but if your "foreign" earnings are taxed at a higher rate than they would in the US and that country has unilateral reciprocity agreements (most places you would be thinking of going would meet both criteria) and you don't have any US income, then you have to file but don't pay anything. If any of the previous points isn't met then you will have to pay the difference. Basically Americans always pay at least an American tax rate, no matter where they are.
- Razengan 6y ago
  > Doing so makes you pay a punitive exit tax on all you assets as if you had sold them. This sounds like the blasphemy punishments for leaving a religion or cult. What’s the point of that?
  - thaumasiotes 6y ago
    The point is to make sure you can't avoid paying the inheritance tax just by not being an American when you die. Of course, it's still obviously worth it since your children won't have to pay the inheritance tax again...
    - Aeolun 6y ago
      If you give up your US citizenship anyway, why would you actually pay them anything? It seems like your obligation to pay the US government ends with your nationality.
deleted 6y ago
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maximente 6y ago
the US allows exclusion of foreign earned income up to a certain point (~$105k for 2019 filing year) under one of two scenarios: - you spent over 330 full (midnight-midnight) days outside the US + its territories, with some important but clear exceptions for things like traveling - you are a "bona fide" resident of another country; this involves an review by a US government official. typically these people pay taxes in another country, send their kids to school there, etc.
morninglight 6y ago
Things have not changed much: "Times are not good here. The city is crumbling into ashes. It has been buried under a lava flood of taxes and frauds and maladministrations so that it has become only a study for archaeologists. Its condition is so bad that when I write about it, as I intend to do soon, nobody will believe I am telling the truth. But it is better to live here in sackcloth and ashes than to own the whole state of Ohio." - Lafcadio Hearn (1850 - 1904)

robjan 6y ago

You still have to pay tax unless you renounce your US nationality.

jkinudsjknds 6y ago
Foreign taxes are deductible though, so it's more of a max
corey_moncure 6y ago
You may still have to pay tax even if you renounce your US nationality, if the IRS finds that you have renounced your nationality so that you don't have to pay taxes anymore.
- theCodeStig 6y ago
  Could you elaborate on that, please?
  - corey_moncure 6y ago
    "The expatriation tax provisions under Internal Revenue Code (IRC) sections 877 and 877A apply to U.S. citizens who have renounced their citizenship and long-term residents (as defined in IRC 877(e)) who have ended their U.S. resident status for federal tax purposes." https://www.irs.gov/individuals/international-taxpayers/expatriation-tax https://www.irs.gov/individuals/international-taxpayers/expa...

CapricornNoble 6y ago

As long as you are a US citizen you are expected to pay Federal income tax, no matter where you are in the world, and no matter where you earned it. The US and Eritrea are the only 2 countries on the planet with this policy. I think you can get your tax burden reduced if you can prove you've paid taxes to another jurisdiction, but don't quote me on that...

komali2 6y ago
You're expected to report your income to the Fed but last time I worked abroad I didn't owe taxes cause I made under some number, I think it was 100k?
pheug 6y ago
Also Hungary and Myanmar if wikipedia to be trusted https://en.wikipedia.org/wiki/International_taxation https://en.wikipedia.org/wiki/International_taxation And there are talks in the air that other countries might follow the suit to buff up their state coffers - https://nomadcapitalist.com/2020/05/12/citizenship-based-taxation-in-canada/ https://nomadcapitalist.com/2020/05/12/citizenship-based-tax...
jcranmer 6y ago
You do get a foreign tax credit. There is also a foreign income inclusion that lets you avoid all taxes, but it comes with some severe restrictions (including not being in the US for more than ~30 days in any 365-day period).
hopia 6y ago
Actually, I think Japan also technically taxes worldwide income of non-resident nationals. And even permanent residents, regardless of where they reside. Moreover, some countries like Finland require you to pay taxes on worldwide income for a number of years after you're no longer a resident of the country and only then granting you tax freedom from income sourced outside of the country. And there's no amount of income you can exclude like the USA's $108k or whatever the figure is currently.

mattr47 6y ago

US has had the federal tax exclusion limit. As long as you are living outside the US for longer than 330 days a year, the first $110k of foreign earned income is tax free.

deleted 6y ago

[deleted]

deleted 6y ago
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aikinai 6y ago

America taxes citizens regardless of residence, but there’s a treaty so you can credit all taxes paid to Japan and you only end up paying the higher of the two.

monocasa 6y ago

You have to pay the difference in income taxes to the US if the nonUS income taxes are lower than US.

microtherion 6y ago

You're required to file taxes in both countries, but the taxes are not additive. Basically, you have to pay the regular taxes in your country of residency, and then pay the US any difference to what you'd have paid in the US.

627467 6y ago
...if a tax treaty between both countries exists.
- jkaplowitz 6y ago
  Or if the foreign tax credit or foreign earned income exclusion aspects of US tax law serve the same purpose as the treaty would. And the treaties often have gaps or gotchas, though they help a lot. (I'm an American in Canada, so I've had to become familiar with all of the above as applied to my case.)

estebank 6y ago

The only way to avoid having to file American taxes as an American is to stop being one, to give up your citizenship. Doing so makes you pay a punitive exit tax on all you assets as if you had sold them. Before going down that route, keep in mind that you are obliged to file taxes on your global earnings, but if your "foreign" earnings are taxed at a higher rate than they would in the US and that country has unilateral reciprocity agreements (most places you would be thinking of going would meet both criteria) and you don't have any US income, then you have to file but don't pay anything. If any of the previous points isn't met then you will have to pay the difference. Basically Americans always pay at least an American tax rate, no matter where they are.

Razengan 6y ago
> Doing so makes you pay a punitive exit tax on all you assets as if you had sold them. This sounds like the blasphemy punishments for leaving a religion or cult. What’s the point of that?
- thaumasiotes 6y ago
  The point is to make sure you can't avoid paying the inheritance tax just by not being an American when you die. Of course, it's still obviously worth it since your children won't have to pay the inheritance tax again...
  - Aeolun 6y ago
    If you give up your US citizenship anyway, why would you actually pay them anything? It seems like your obligation to pay the US government ends with your nationality.

deleted 6y ago

[deleted]

maximente 6y ago

the US allows exclusion of foreign earned income up to a certain point (~$105k for 2019 filing year) under one of two scenarios: - you spent over 330 full (midnight-midnight) days outside the US + its territories, with some important but clear exceptions for things like traveling - you are a "bona fide" resident of another country; this involves an review by a US government official. typically these people pay taxes in another country, send their kids to school there, etc.

morninglight 6y ago

Things have not changed much: "Times are not good here. The city is crumbling into ashes. It has been buried under a lava flood of taxes and frauds and maladministrations so that it has become only a study for archaeologists. Its condition is so bad that when I write about it, as I intend to do soon, nobody will believe I am telling the truth. But it is better to live here in sackcloth and ashes than to own the whole state of Ohio." - Lafcadio Hearn (1850 - 1904)