4 ms·

So, I'll be honest, taxes in the EU are (at the basic levels) near what they are in the US - top-line last-dollar percentage wise anyhow. But in the US there's

by abofh 4y ago

So, I'll be honest, taxes in the EU are (at the basic levels) near what they are in the US - top-line last-dollar percentage wise anyhow. But in the US there's a massive cottage industry in creating and managing deductions. I'm currently abroad, so while I'm subject to US taxes, the FEIE allows the first 112k to be deducted from income tax (not SS, so not everything but the bulk of it), and while I still expect to touch the 35% tax bracket on my last dollar earned this year, when you factor in the plethora of deductions, my effective tax rate is currently around 10%, and by year end will likely creep up to 17%. I've lived in a few EU countries over the years, generally under digital nomad programs that exempt from local taxes - but it's still helpful by way of comparison, that right now, if I were to pay at the same rate in my current country, I'd be much closer to 30% than 20%. Moreover, those earning substantially more than I am are largely not doing it as W2 (employees) or 1099 (contractors), but as investors earning capital gains - which themselves are taxed at a maximum of 20%. You can add to the US burden state taxes, but some states don't tax income at all (Texas), or they do their taxation based off the federal AGI, so all of your deductions kick in for the state stuff as well. If by some weird event I was earning 10x what I earn today, you can rest assured my tax rate in the US wouldn't go up from here, but instead it would be restructured into deferred capital gains (stock options), corporate ownership, investment in tax deferred or tax exempt accounts and so forth - because at the point where we're haggling over that much money, it's worth everyone's time to optimize even a 1% difference - by paying someone to do exactly that. So yes, a 500k salary isn't 500k take home, but without doing anything different than what I'm doing today, it'd be pretty close to a 400k take-home under US tax law.

Dracophoenix 4y ago
Which digital nomad programs have used? Any that you currently recommend?
- abofh 4y ago
  I'm a big fan of Croatia myself, but their program is one year, not renewable without a break (and starting next year, a full Schengen break), but it'll depend a lot on the lifestyle you want. I want cheap, beaches and quiet at least outside of the tourist season. I've heard good things about Portugals, but no direct experience. Montenegro has announced a two year one that's renewable once that I may give a trial when my current Croatia one runs out, but it's brand new and the government websites are currently under a bit of a DoS so getting details is harder. Germany could be good if you like it there, I think Italy just announced one, and if you're more into the Nordic scene, I think Norway has one. But I'm primarily in the EU because my partner is here, you can find them in a number of other countries, depending on the lifestyle and culture you want to spend time in. Not all of them are tax free, but most of them are. Do some googling, there's always an expat services organization that will offer overpriced consulting (but you may still want to use them, it can be frustrating if you don't speak the local languages). Also ask yourself if you want to find a new home, some nomad years don't count towards permanent residency requirements, so you may be delaying things while you do it. For me that's fine, for you maybe not. If you've got the liquidity it's usually worth going for a couple weeks before you make any final decisions to scope out the local territory and see if you can operate comfortably, but I'd encourage anyone thinking about it to look into it, you may find a lifestyle you really like better than home, wherever that is.
gigatexal 4y ago
I’m an expat here too and I pay a CPA to do my taxes. (1 rental means a biz return and all the deductions… meh) if you can take home 400k from 500k in gross then you’re doing amazingly well.
- gnicholas 4y ago
  This sounds too good to be true to me (as a former tax lawyer). If you're being paid 500k in salary I can't think of how you take home this much. Maybe you put a ton into tax-deferred accounts, but that's not the same as netting 80% as take-home. It's kicking the can down the road (to a time when tax rates may be even higher).
  - gigatexal 4y ago
    Tangent: are you a former tax lawyer turned dev? What’s your story? I am a sucker for folks that have interesting or non-traditional (CS degree -> sw job) journeys into tech.
    - gnicholas 4y ago
      I did two years of CS undergrad before switching to Econ and Linguistics. Then went straight to law school like a good boy. I worked 7 years in BigLaw and dabbled on the side with a side project. Didn't do the coding myself but knew enough to work closely with the devs doing the work. One day I posted on HN [1] and it blew up and became the 9th-most popular Show HN. A few weeks later we were in FastCo and dozens of other news outlets, and a couple months after that we won a startup competition at Stanford. My wife had a baby at that time, so I decided to do the startup full-time to give it a go and also have more time with the baby and supporting my wife's demanding career. The baby is now eight, and it's been awesome to be so involved in her life. In terms of coding, I'm able to do minor code tweaks here and there, but all the heavy lifting was done by my technical cofounder and a couple excellent contractors. Our main revenue source is actually IP licensing, so having been a lawyer comes in handy! 1: https://news.ycombinator.com/item?id=6335784 https://news.ycombinator.com/item?id=6335784
gnicholas 4y ago
> If by some weird event I was earning 10x what I earn today, you can rest assured my tax rate in the US wouldn't go up from here, but instead it would be restructured into deferred capital gains (stock options), corporate ownership, investment in tax deferred or tax exempt accounts and so forth What would you do to go from 200k to 2M without increasing your tax rate, if you're being paid in cash salary? Can you contribute millions to retirement accounts?
- abofh 4y ago
  That's the trick - if you're being 200k, your ability to negotiate how you're paid is limited, if you're being paid 2MM, you can almost certainly negotiate the payments to be a more tax favored solution.

by abofh 4y ago

Dracophoenix 4y ago

Which digital nomad programs have used? Any that you currently recommend?

abofh 4y ago
I'm a big fan of Croatia myself, but their program is one year, not renewable without a break (and starting next year, a full Schengen break), but it'll depend a lot on the lifestyle you want. I want cheap, beaches and quiet at least outside of the tourist season. I've heard good things about Portugals, but no direct experience. Montenegro has announced a two year one that's renewable once that I may give a trial when my current Croatia one runs out, but it's brand new and the government websites are currently under a bit of a DoS so getting details is harder. Germany could be good if you like it there, I think Italy just announced one, and if you're more into the Nordic scene, I think Norway has one. But I'm primarily in the EU because my partner is here, you can find them in a number of other countries, depending on the lifestyle and culture you want to spend time in. Not all of them are tax free, but most of them are. Do some googling, there's always an expat services organization that will offer overpriced consulting (but you may still want to use them, it can be frustrating if you don't speak the local languages). Also ask yourself if you want to find a new home, some nomad years don't count towards permanent residency requirements, so you may be delaying things while you do it. For me that's fine, for you maybe not. If you've got the liquidity it's usually worth going for a couple weeks before you make any final decisions to scope out the local territory and see if you can operate comfortably, but I'd encourage anyone thinking about it to look into it, you may find a lifestyle you really like better than home, wherever that is.

gigatexal 4y ago

I’m an expat here too and I pay a CPA to do my taxes. (1 rental means a biz return and all the deductions… meh) if you can take home 400k from 500k in gross then you’re doing amazingly well.

gnicholas 4y ago
This sounds too good to be true to me (as a former tax lawyer). If you're being paid 500k in salary I can't think of how you take home this much. Maybe you put a ton into tax-deferred accounts, but that's not the same as netting 80% as take-home. It's kicking the can down the road (to a time when tax rates may be even higher).
- gigatexal 4y ago
  Tangent: are you a former tax lawyer turned dev? What’s your story? I am a sucker for folks that have interesting or non-traditional (CS degree -> sw job) journeys into tech.
  - gnicholas 4y ago
    I did two years of CS undergrad before switching to Econ and Linguistics. Then went straight to law school like a good boy. I worked 7 years in BigLaw and dabbled on the side with a side project. Didn't do the coding myself but knew enough to work closely with the devs doing the work. One day I posted on HN [1] and it blew up and became the 9th-most popular Show HN. A few weeks later we were in FastCo and dozens of other news outlets, and a couple months after that we won a startup competition at Stanford. My wife had a baby at that time, so I decided to do the startup full-time to give it a go and also have more time with the baby and supporting my wife's demanding career. The baby is now eight, and it's been awesome to be so involved in her life. In terms of coding, I'm able to do minor code tweaks here and there, but all the heavy lifting was done by my technical cofounder and a couple excellent contractors. Our main revenue source is actually IP licensing, so having been a lawyer comes in handy! 1: https://news.ycombinator.com/item?id=6335784 https://news.ycombinator.com/item?id=6335784

gnicholas 4y ago

> If by some weird event I was earning 10x what I earn today, you can rest assured my tax rate in the US wouldn't go up from here, but instead it would be restructured into deferred capital gains (stock options), corporate ownership, investment in tax deferred or tax exempt accounts and so forth What would you do to go from 200k to 2M without increasing your tax rate, if you're being paid in cash salary? Can you contribute millions to retirement accounts?

abofh 4y ago
That's the trick - if you're being 200k, your ability to negotiate how you're paid is limited, if you're being paid 2MM, you can almost certainly negotiate the payments to be a more tax favored solution.