How do taxes work for an American living abroad?
 

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?

Re: How do taxes work for an American living abroad?
 

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.

Re: How do taxes work for an American living abroad?
 

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.

Re: How do taxes work for an American living abroad?
 

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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.

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Oh say can you see...

Re: How do taxes work for an American living abroad?
 

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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.

Re: How do taxes work for an American living abroad?
 

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

Re: How do taxes work for an American living abroad?
 

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.

Re: How do taxes work for an American living abroad?
 

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.

Re: How do taxes work for an American living abroad?
 

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

Re: How do taxes work for an American living abroad?
 

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