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I thought that in tax treaty situations you only pay the maximum tax rate? So the place you lived/ worked gets their tax cut or the US gets the difference (or s
by doopy1 5y ago
I thought that in tax treaty situations you only pay the maximum tax rate? So the place you lived/ worked gets their tax cut or the US gets the difference (or something along those lines). Hard to imagine someone paying 70% of their income in taxes just for living somewhere else for a little while.
- jandrewrogers 5y agoIt isn't that simple in practice unless your finances are trivial. Even under a tax treaty there are a several circumstances where you'll pay more total taxes than if you solely paid taxes in either country. Tax incidence is determined per income type, it is not based on your total tax return; you can pay more taxes locally than you would in the US and still owe a lot of taxes to the US. Similarly, differences in definitions, recognition, taxation across types of income can differ between countries such that you end up paying taxes that are not recognized by the US and therefore are not credited as taxes paid. It is pretty complicated. The US tax code places an indefensible burden on expats. Also, some States (looking at you California) can require you to pay income taxes even if you live overseas for the entire year.
- ska 5y agoWhile that's probably right in spirit most of the time for simple taxes, this entirely depends on the tax treaty. Other factors to think about: - not all countries have tax treaties, the default is you owe in both places - tax deferment schemes complicate things (e.g. 401(k)), the countries won't look at this income the same way - some tax treaties require specific actions, missing these may leave you owing - not all income types will be treated the same way in both jurisdiction (e.g. cap gains, rental properties,etc.) - etc.