US $106k Foreign Earned Income Exclusion

[NPCampbell]

One side benefit of the current pandemic is that companies now realize that remote working is viable. My job looks like it will go 100% remote so I am researching the income tax implications of working outside the US.

The FEIE seems like a massive tax break. I paid a nominal income tax rate of 27% on my AGI and the FEIE excludes $106,000 of income for 2019. This seems like it could be a $29k tax break? Or am I missing something?

How tough is it to get the FEI exclusion if you are voluntarily working overseas and not the result of a company transfer?

What if my residence is on a boat and not a permanent residence?

What locales are advantageous? Bahamas, VI, etc? How tough is it to get a work permit/residence in these countries?

[AndrewA2]

Originally Posted by NPCampbell

One side benefit of the current pandemic is that companies now realize that remote working is viable. My job looks like it will go 100% remote so I am researching the income tax implications of working outside the US.

The FEIE seems like a massive tax break. I paid a nominal income tax rate of 27% on my AGI and the FEIE excludes $106,000 of income for 2019. This seems like it could be a $29k tax break? Or am I missing something?

How tough is it to get the FEI exclusion if you are voluntarily working overseas and not the result of a company transfer?

What if my residence is on a boat and not a permanent residence?

What locales are advantageous? Bahamas, VI, etc? How tough is it to get a work permit/residence in these countries?

Unless your primary residence is overseas (and you have the required local visa's/residence etc to allow for that) your income will be US based. ie your company will direct deposit into your US bank account, therefore not applicable for FEIE (as i understand it)

And then, once you are resident in another country, you will need to pay THEIR tax requirements on your income

[steffan]

This topic is of interest - I'll be in the same position in a couple of years. The trick might be that you need to be in another country for the full year, not just out of the US. Probably worth talking it through with your accountant. If you are self-employed there's an extra wrinkle there too.

There is some basic info here: https://www.irs.gov/individuals/inte...come-exclusion

[slug]

Originally Posted by NPCampbell

One side benefit of the current pandemic is that companies now realize that remote working is viable. My job looks like it will go 100% remote so I am researching the income tax implications of working outside the US.

The FEIE seems like a massive tax break. I paid a nominal income tax rate of 27% on my AGI and the FEIE excludes $106,000 of income for 2019. This seems like it could be a $29k tax break? Or am I missing something?

How tough is it to get the FEI exclusion if you are voluntarily working overseas and not the result of a company transfer?

What if my residence is on a boat and not a permanent residence?

What locales are advantageous? Bahamas, VI, etc? How tough is it to get a work permit/residence in these countries?

If you are a non resident in the US this implies that you are a resident in another country

My accountant asks to see my work contract , passport with foreign visa and my tax declaration for a foreign country

You would be best advised to speak with a tax advisor who specializes in expatriate Americans

I can tell you that the double paperwork, foreign plus USA tax’ returns ...is a pain in the ass, FBAR compliance is a pain in the ass and my accountant tax lawyers bill each year is a pain in the ass

At this very moment I am filling out US tax returns

Again speak to a specialist

[NPCampbell]

Originally Posted by AndrewA2

Unless your primary residence is overseas (and you have the required local visa's/residence etc to allow for that) your income will be US based. ie your company will direct deposit into your US bank account, therefore not applicable for FEIE (as i understand it)

And then, once you are resident in another country, you will need to pay THEIR tax requirements on your income

I grew up in developing countries but I have spent over 30 years in Dallas. I have no problem making a foreign country my permanent residence for the next few years. Some countries, like the Bahamas, have no income tax, only VAT. Therefore, I would gladly pay their income tax

[Sailing August]

Hi,
I worked outside of the USA for 6 years in Germany.
You must stay out of the USA for 250 days to avoid paying income tax. I don't know how they track it but they do. You still MUST file EVERY year and just show zero (0) US income on your form E1040. This is very important so that you don't get trouble with social security when you go to claim it in the future.

[slug]

The original poster might investigate Puerto Rico

They have special tax benefits for people who work remotely in the new economy

[barnakiel]

Also, study deep the concept of 'tax residency'.


It is deployed differently by different states and at times a cause of bitter grief of many a well meaning, unexpecting, foreigner.


In few words, you want to avoid becoming a tax resident in any country that is not your own. Unless you have a sound tax incentive to act otherwise.


Good luck.


Cheers,
b.

[Dockhead]

A lot of wrong information here. For God's sake, get professional advice.


FEIE (I've been taking it for the last 30 years) is NOT a tax break, unless you are tax resident in a country with lower income taxes than the U.S. If you live in Russia, Estonia, Latvia, Ukraine, or several other countries with low flat taxes, then it can work out fairly nicely. But if you live in Germany, France, Italy, or Scandinavia with higher taxes, the FEIE is worthless -- you rather take the foreign tax credit. It can be good if you are a nomad without any other tax home -- it is NOT a requirement that you pay taxes somewhere else. But this is extremely complicated to do right -- professional help.



There are many conditions. You don't necessarily have to be out of the U.S. for a certain period of time (physical presence test) if you have attributes of bona residency in a foreign country (bona fide residence test). Where the bank account is where you receive your salary is irrelevant. If you are paid as an independent contractor, you are not relieved of social security taxes. It's a complex enough minefield that you MUST have professional help.

[NPCampbell]

Originally Posted by slug

If you are a non resident in the US this implies that you are a resident in another country

My accountant asks to see my work contract , passport with foreign visa and my tax declaration for a foreign country

You would be best advised to speak with a tax advisor who specializes in expatriate Americans

I can tell you that the double paperwork, foreign plus USA tax’ returns ...is a pain in the ass, FBAR compliance is a pain in the ass and my accountant tax lawyers bill each year is a pain in the ass

At this very moment I am filling out US tax returns

Again speak to a specialist

I will definitely speak to a specialist ... right now I'm looking for the "hey, this never works because ..." type of feedback before I take the next step.

I'm not looking at evading taxes ... just avoiding them. I would be selling my home, keeping my rental properties but legitimately be living in a foreign country while working for my current employer.

As for FBAR, I have to maintain a US bank account for rental properties and I'd like to have my paychecks deposited in a US bank as well. I don't know if that gets around FBAR issues or not.

[Dockhead]

Originally Posted by NPCampbell

. . .As for FBAR, I have to maintain a US bank account for rental properties and I'd like to have my paychecks deposited in a US bank as well. I don't know if that gets around FBAR issues or not.

FBAR is not a big deal if you are simply careful to fill out all the forms, on time. These days it's all done online. It doesn't matter whether you deposit paychecks in a U.S., or a foreign bank account. Just be sure to do all the required reporting on all foreign accounts, and that includes investment accounts.

[slug]

Originally Posted by NPCampbell

I will definitely speak to a specialist ... right now I'm looking for the "hey, this never works because ..." type of feedback before I take the next step.

I'm not looking at evading taxes ... just avoiding them. I would be selling my home, keeping my rental properties but legitimately be living in a foreign country while working for my current employer.

As for FBAR, I have to maintain a US bank account for rental properties and I'd like to have my paychecks deposited in a US bank as well. I don't know if that gets around FBAR issues or not.

Find a good advisor and personally visit their office

The “ rules “ state that a lawyer giving tax advice must know their client

Establish your identity and relationship with the adviser long before you pull the trigger

Be aware that this type of lawyer , tax adviser is hard to find and expensive ...450 per hour

[denverd0n]

You do have to establish "bona fide residence" in the foreign country. That is not as easy as just going there and staying. Pretty much all countries will require you to jump through some sort of hoops to become a resident.


You mentioned the Bahamas. You can only stay for 90 days unless you qualify for some sort of long-stay visa. Without a long-stay visa the IRS is highly unlikely to consider you a "bona fide resident." So, the first thing you need to do is determine if you can qualify for residency in some other (presumably, lower-tax) nation.


Good luck.

[belizesailor]

Originally Posted by NPCampbell

I will definitely speak to a specialist ... right now I'm looking for the "hey, this never works because ..." type of feedback before I take the next step.

I'm not looking at evading taxes ... just avoiding them. I would be selling my home, keeping my rental properties but legitimately be living in a foreign country while working for my current employer.

As for FBAR, I have to maintain a US bank account for rental properties and I'd like to have my paychecks deposited in a US bank as well. I don't know if that gets around FBAR issues or not.

FEIE, FBAR, & FATCA...all start with "F" for a reason...dont comply properly and you can get properly F'ed!

Consult a pro.

[dwedeking2]

Even without the tax breaks I'd rather work remotely from out of the US than in some cubicle. (did it for a few years)