4 ms·

If you're a US citizen it's not so easy. You are taxed on your worldwide income no matter what. There is a deduction for living abroad on the first $100,800 (

If you're a US citizen it's not so easy. You are taxed on your worldwide income no matter what. There is a deduction for living abroad on the first $100,800 (2015) of income or you can also take a credit for income taxes paid to another country. You also need to pay into SS and Medicare either in the US or in another country which we have a treaty with. Don't get me wrong, getting the first $101k @ 4% tax sounds pretty good! Just want to make it clear that US citizens will pay taxes to Uncle Sam no matter where you try and hide.

seanmcdirmid 12y ago
This is not completely accurate. I am not a tax attorney but go through this every year. First, you can take the foreign income exclusion only on income that has been taxed by the foreign country you reside in. Second, you can't exempt taxes on that $100k, but you can for anything above that; alternatively you can just exempt taxes for everything and not take the exclusion (works out if country's taxes > usa taxes, really, the exclusiom just works out for low tax countries like Singapore, Hong Kong, and Switzerland). Also, the income has to be sourced in the foreign country, if it is sourced in say New York you can't magically tansfer those taxes to another country without incorporating there. You do not have to pay payroll taxes. When living abroad, some treaties allow you to pay them instead of local ones, but without a treaty you just don't pay. Of course, good luck ever collecting on your chinese social retirement account.
airmondii 12y ago
Puerto Rico is not a foreign country so these rules you cited don't apply. If you are a bone-fide PR resident, you don't owe federal tax (FICA still applies). However Act 20 (and Act 22) are recent changes to try to bring more job creator-types to the island.
ben_pr 12y ago
Most people do not realize that Puerto Rico is not a foreign country for U.S citizens and so while this may be good points for other situations it does not apply to Puerto Rico. You are correct on the SS and medicare but the assumption is if you are the business owner the majority of your income will be dividends and not subject to SS or Medicare, so just the 4% tax applies.

seanmcdirmid 12y ago

This is not completely accurate. I am not a tax attorney but go through this every year. First, you can take the foreign income exclusion only on income that has been taxed by the foreign country you reside in. Second, you can't exempt taxes on that $100k, but you can for anything above that; alternatively you can just exempt taxes for everything and not take the exclusion (works out if country's taxes > usa taxes, really, the exclusiom just works out for low tax countries like Singapore, Hong Kong, and Switzerland). Also, the income has to be sourced in the foreign country, if it is sourced in say New York you can't magically tansfer those taxes to another country without incorporating there. You do not have to pay payroll taxes. When living abroad, some treaties allow you to pay them instead of local ones, but without a treaty you just don't pay. Of course, good luck ever collecting on your chinese social retirement account.

airmondii 12y ago

Puerto Rico is not a foreign country so these rules you cited don't apply. If you are a bone-fide PR resident, you don't owe federal tax (FICA still applies). However Act 20 (and Act 22) are recent changes to try to bring more job creator-types to the island.

ben_pr 12y ago

Most people do not realize that Puerto Rico is not a foreign country for U.S citizens and so while this may be good points for other situations it does not apply to Puerto Rico. You are correct on the SS and medicare but the assumption is if you are the business owner the majority of your income will be dividends and not subject to SS or Medicare, so just the 4% tax applies.