US Taxes on X-Pats

Robert Hettinga <rah@shipwright.com>
> However, as Black Unicorn has noted here before, the Phillipenes are the
>only other country besides the USofA where citizens are taxed any income
>you get, no matter where on earth you actually earn it.

It is not exactly that bad if you are outside the USA. I got ahold of the
IRS codes on this before I left the USA (so about 2 years ago).  The rule
then was that the first $70,000 you earned was tax free if you were
outside the USA for 330 days or more of the year.  From another x-pat in
Anguilla I heard that the $70 K had been increased. 

If you live outside the USA and have a corporation outside the USA, you
might prefer that the corporation buy a company yacht rather than pay you
more than $70 K.  And at least on this tropical island, $70,000 tax free
would go a very long way. 

It is true that if you are getting dividends and interest on your fortune
that moving outside the USA won't help, unless you get rid of your 
US citizenship.  And the USA wants you to pay capital gains on your
fortune as if you sold everything for cash right before you got rid of
your US citizenship.  So it seems best to get rid of it before you
are really rich.  :-)

   --  Vince

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Vincent Cate   vince@offshore.com.ai  http://www.offshore.com.ai/vince/
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On Sat, 17 Aug 1996, Vincent Cate wrote:

> 
> Robert Hettinga <rah@shipwright.com>
> > However, as Black Unicorn has noted here before, the Phillipenes are the
> >only other country besides the USofA where citizens are taxed any income
> >you get, no matter where on earth you actually earn it.
> 
> It is not exactly that bad if you are outside the USA. I got ahold of the
> IRS codes on this before I left the USA (so about 2 years ago).  The rule
> then was that the first $70,000 you earned was tax free if you were
> outside the USA for 330 days or more of the year.  From another x-pat in
> Anguilla I heard that the $70 K had been increased. 
	Is this so? Last I had heard, Congress was looking at eliminating 
the credit altogether. It's slightly misleading to call it "tax free", 
though; the way I understand it, it's not included in the IRS's 
estimation of your assets, but may play a factor in determining the final 
amount of $$$ you end up paying. Very rarely does it translate directly 
into a $70,000 break on your taxes, although it does help. At least 
that's the way it has been represented to me (albeit by an expatriate 
chapter of the American Businessmen's Association). There are no doubt 
rules and exceptions to what manner of income may be exempted, as well. 
	It would be wonderful if the amount were increased. It would be 
preferable if the requirement to pay taxes at all were eliminated, but 
that would be asking too much of today's deficit-hungry, anti-"corporate 
welfare" environment...
Not that it affects me anymore one way or the other, except insofar as it 
hinders the desireability of U.S. workers abroad. One wonders that 
whether the spread of such potential tax-avoidance schemes as 
ecash/data-havens may, er, restore U.S. competitiveness in a novel way. 
:-) 

-David Molnar

On Sat, 17 Aug 1996, DAVID A MOLNAR wrote:
> On Sat, 17 Aug 1996, Vincent Cate wrote:
> > It is not exactly that bad if you are outside the USA. I got ahold of the
> > IRS codes on this before I left the USA (so about 2 years ago).  The rule
> > then was that the first $70,000 you earned was tax free if you were
> > outside the USA for 330 days or more of the year.  From another x-pat in
> > Anguilla I heard that the $70 K had been increased. 
> 	Is this so? Last I had heard, Congress was looking at eliminating 
> the credit altogether. It's slightly misleading to call it "tax free", 
> though; the way I understand it, it's not included in the IRS's 
> estimation of your assets, but may play a factor in determining the final 
> amount of $$$ you end up paying. Very rarely does it translate directly 
> into a $70,000 break on your taxes, although it does help.

I am sure one of the 100+ X-Pats on this island would have been talking
about it if this were going to be eliminated, and I have not heard
anything. So I am sure it is still there.  But you can call 1-800-tax-1040
to check. After they finish with this question, ask them what it means in
the tax code where it says that income taxes are "voluntary complience". 
Have your Websters open to the definition of voluntary. Always good for a
laugh. 

The idea was no taxes on the first $70,000 earned outside the USA.
Dividends and interest were not counted as "earned".

Having $70,000 that you can earn tax free will never translate into a
$70,000 break on your taxes (unless they get to 100% tax rate). 

   --  Vince

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Vincent Cate   vince@offshore.com.ai  http://www.offshore.com.ai/vince/
Offshore Information Services         http://www.offshore.com.ai/