How do taxes work for an American living abroad?

[geormiet]

I'm an American, pretty new full time poker player, living in California. 2005 was the first year that I ever paid taxes (on poker winnings or otherwise) and needless to say, it was a bit of a punch in the gut.

Moving to a different location is not out of the question for me, and I was wondering if someone might give me a simple explanation of how taxes would work if I were to live abroad.

I've heard that if you live out of the country, you don't pay taxes on your first 80k of income. Is it this simple?

Also, can an American simply move to, say, Canada or New Zealand and maintain residence as a non-citizen there indefinitely?

[randomstumbl]

I think you're going to get a foreign tax credit equal to the taxes you pay in the foreign country. Assuming you would pay whatever country you live in less than you would have paid living in the US, you then pay the difference to the US. In other words, your tax liability will be either the same or greater than if you hadn't moved.

As far as I know, you have to renounce your citzenship to legally avoid paying US taxes. As always, consult a CPA.

[youtalkfunny]

I lived out of the country for about a year. The country I lived in withheld about 1/3 of my pay. I never got any of that back.

When I got home, I had to claim that income, and it was taxed again. H&R Block had no help to offer. The income went on my 1040A just like it was any other income.

Then again, with all my EIC and Child Tax Credits, it's possible that I had already maxxed my available tax credits.

I guess you can hide in another country. But I know that the entire time I was overseas, I always knew the quickest way to the American Embassy, ready to sprint in that direction at the first sign of trouble.

[awval999]

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I guess you can hide in another country. But I know that the entire time I was overseas, I always knew the quickest way to the American Embassy, ready to sprint in that direction at the first sign of trouble.

[/ QUOTE ]

Oh say can you see...

[OtisTheMarsupial]

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I was wondering if someone might give me a simple explanation of how taxes would work if I were to live abroad.

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you really should consult a tax attorney and/or pick up a few books about it. You may want to start your own business.


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Also, can an American simply move to, say, Canada or New Zealand and maintain residence as a non-citizen there indefinitely?

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no, it is not that simple. You should spend some time at your local Borders and online with the help of google.

[msk]

When I lived outside the USA many years ago, my overseas income was not taxed by the USA. Now, no matter where you live you owe Uncle Sam taxes if you are a USA citizen. But there is an $80k per year exclusion if you meet certain rules. Check out irs.gov and search for 'foreign income'
I would also call an accountant.

MK

[nycplayer]

I lived in Japan for three years. I was considered a long-term resident of Japan, similar to having a green card in the US. You have to file US taxes every year, but if you are out of the U.S. for at least 330 days of the yea, you can claim an exclusion for your first $80,000. The IRS will give you an exchange rate to use at tax time.

There are more details, but that covers the basics. Of course I also had to pay taxes to Japan, and those I did not get back. Japan's tax and US tax are about equivalent, but you get a lot more for your tax money in Japan - like excellent free healthcare, inexpensive childcare, subsidized apartment for young middle-class families, and a violent crime rate close to zero.

[driller]

The 80k exclusion only applies to EARNED income, which specifically does not include gambling winnings. Any taxes paid to a foreign country can be taken as a credit on your U.S. taxes and can be carried over.

[Punker]

Can you clarify the difference between earned income and gambling winnings?

[balkii]

gambling winnings are certainly earned income if you file as a pro. if you claim that a recreational then im not sure

[Diplomat]

The long and the short of it is that the US taxes on the basis of citizenship.

-Diplomat

[hobbsinholland]

I am currently living/working in the Netherlands as a legal resident, but am a U.S. citzen. As a U.S. citizen, you have to file every year, but do get an exemption on the first 80k you make working in that country. Anything over that you have to pay taxes on. BUT (and this is a big but) you can get a tax credit for the taxes payed in the country you are living in if it does have a tax treaty with the U.S., which many countries do.

That said, I do not think that taxes are your biggest concern. It isn't very easy to just move to another country and take up legal residence. And if you are not legally living in a country then you are not going to be paying taxes there, thus not eligible for the foreign tax exeption.

If you really want to live abroad I would suggest doing some research on how you can become a legal resident in another country. It isnt as easy as you may think. Esspecially if you are not in a career path that adds value to thier country.