Why Do Expats Pay So Little in US Tax?Feb 12 • Categorized as Expat Tax Basics
The simple answer is that we don’t live in the USA so why should we have to pay any US tax at all! The fact is that the US government taxes expats and has for nearly 100 years. One look on the inside of your US passport and you will see that you are required to file each year. One look at the US deficit will show you that the IRS is using every method possible to track down every last nickel they can find! BUT THAT DOESN’T MEAN YOU WILL OWE ANY US TAX!
US expats are one of the only demographics I can think of where the middle class gets more tax advantages than the Warren Buffets of the world. How is that? Well the middle class is the working class and workers EARN their income – unlike the rich who get it via capital gains which have a low tax rate. Earned income abroad has some very special tax breaks that mean that you can earn a 6 figure income abroad and have ZERO US tax liability! I will explain.
The US government wants to encourage people to work abroad. This opens up a broader network for US businesses, brings US ideas around the world and brings global ideas back to the US. To encourage US citizens to work abroad the government has instituted a number of Expat Tax Breaks which can easily save you 6 figures on your US tax bill. The most popular of these tax breaks is called the Foreign Income Exclusion – qualifying US expats can exclude $92,900 of their foreign earned income from their US taxes. Best of all you don’t need political connections to receive this benefit – you need to either live in a foreign country for 330 days in any 365 day period or you need to be a bona fide resident of a foreign country. It gets better – if you are married your spouse gets an additional $92,900 of tax savings on top of your tax savings!
Now if that doesn’t have you excited I will through in a little bonus (or rather the IRS will) as an Expat you don’t need to file your US taxes until June 15th each year! So not only can you earn an income of over $200,000 and keep it all – you don’t have to deal with the April rush of getting your taxes sorted.
Best of all you don’t have to beg, borrow or lobby to receive these tax breaks! They are 100% legal and if you have someone giving you good Expat Tax Advice this is just the beginning of your US tax savings! You can easily make over $200,000 while living abroad and pay $0.00 (yes ZERO) in US tax each year! Think about how much you spent in US taxes last year – now think about spending that money on the tropical paradise of your choice!
If you are currently living abroad and you want to make sure you are paying the absolute minimum in US tax that you legally can contact Greenback Expat Tax Services today!