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its complex.. The USA has FEIE, (no federal taxes the first $120k/yr), but not all states (like Cali) honor that and may still charge you state income tax. an

by itake 2y ago

its complex.. The USA has FEIE, (no federal taxes the first $120k/yr), but not all states (like Cali) honor that and may still charge you state income tax. and FEIE doesn't exempt you from self-employment taxes. and doesn't exempt non-earned income (dividends, etc.). Americans can come out ahead (if they earn less than $120k/yr and live in a 0% tax country). But a non-American (like Canadian) doing the samething, would have less restrictions.

EduardoBautista 2y ago
> but not all states (like Cali) honor that and may still charge you state income tax Whoa, so before moving to a low tax country you should move to a state that is not insane for a while and then move abroad? Crazy.
- jandrewrogers 2y ago
  Yes, this is a real thing. There are a few States like South Dakota that have kind of made a business of helping expats launder their State citizenship.
- ApolloFortyNine 2y ago
  Yes, but from reading it sounds like California is a bit of a poison pill and will go at length to try and say you still live there. I've read of cases where even living in another state for 6+ months, drivers license moved over, no property in California, wasn't enough. Not sure how they get away with it really, small volume I guess.
returningfory2 2y ago
This isn’t the full story though, because there is also the foreign tax credit. If your US taxes are lower than your foreign taxes (which they will be if eg you live in Europe) you won’t pay US tax: https://www.irs.gov/individuals/international-taxpayers/foreign-tax-credit https://www.irs.gov/individuals/international-taxpayers/fore...
- jandrewrogers 2y ago
  There are myriad cases where this is not true, the details of how these tax credits are structured can lead to significantly adverse outcomes. It is quite possible to pay more taxes in aggregate than either country separately.
  - PaulDavisThe1st 2y ago
    It is certainly possible, but also implies a complex mix of different income types and very specific national pairing. The usual case where there is a tax treaty is that the expat pays taxes at the rate of the country in which they work. It's really that simple for most people.

by itake 2y ago

EduardoBautista 2y ago

> but not all states (like Cali) honor that and may still charge you state income tax Whoa, so before moving to a low tax country you should move to a state that is not insane for a while and then move abroad? Crazy.

jandrewrogers 2y ago
Yes, this is a real thing. There are a few States like South Dakota that have kind of made a business of helping expats launder their State citizenship.
ApolloFortyNine 2y ago
Yes, but from reading it sounds like California is a bit of a poison pill and will go at length to try and say you still live there. I've read of cases where even living in another state for 6+ months, drivers license moved over, no property in California, wasn't enough. Not sure how they get away with it really, small volume I guess.

returningfory2 2y ago

This isn’t the full story though, because there is also the foreign tax credit. If your US taxes are lower than your foreign taxes (which they will be if eg you live in Europe) you won’t pay US tax: https://www.irs.gov/individuals/international-taxpayers/foreign-tax-credit https://www.irs.gov/individuals/international-taxpayers/fore...

jandrewrogers 2y ago
There are myriad cases where this is not true, the details of how these tax credits are structured can lead to significantly adverse outcomes. It is quite possible to pay more taxes in aggregate than either country separately.
- PaulDavisThe1st 2y ago
  It is certainly possible, but also implies a complex mix of different income types and very specific national pairing. The usual case where there is a tax treaty is that the expat pays taxes at the rate of the country in which they work. It's really that simple for most people.