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Old 02-08-2015, 01:21 PM   #41
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Isn't paying taxes to the IRS On foreign income moot for most early retirees?

Most of the people here have their retirement assets in US institutions?

So the dividends and cap gains would mostly be from US assets?

The more interesting question would be if an EU country that granted a retirement visa would try to get their taste of your retirement income (social security, pension, 401k withdraws, dividends, cap gains, etc).
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Old 02-08-2015, 01:21 PM   #42
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A US citizen can for example apply for the 'Foreign earned income exclusion' and if their income is under 80k per year worldwide while living abroad, will pay no US income tax and will not have to give up US citizenship. In fact, they can even maintain a home in the US while doing that. Something I could not do in Canada. Here is an explanation.
Tax on Foreign Earned Income for US Citizens | Serbinski Accounting Firms

What they would have to do though is derive their income outside of the USA as it is 'foreign earned income' that the exclusion applies to. I have met US citizens living abroad who paid no income tax in the USA and did not renounce their citizenship.
I expect to pay no US taxes even though I have no earned income, but this is because the taxes I will be paying in the UK on my passive income (which is mostly US pensions and withdrawals from investments) will be slightly higher than my US taxes so will offset them to zero.

However, I will have to go to the trouble and expense of filing a US tax return every year.

Many "Accidental Americans" are being swept up in the net in recent years due to FACTA. One of the more famous of these in the London Mayor, Boris Johnson who was born in New York but left when he was 5 years old(his parents were over there on an assignment). A few years back he took his wife and children on a vacation to Mexico, changing at Houston, but the airline at London would not let him board the aircraft as another quirk to being a US citizen is that you must enter and leave the US on a US passport, which he didn't have. Although he was not spending the night in Houston they needed to go through immigration to board the flight they were booked on to Mexico.

He wrote a scathing article about this in a British newspaper saying that he had to pay a "tonking load of money" to cancel his flight and book another that did not go via the USA, but he did say that he got there faster and was able to meet his wife and children when they arrived via Houston. He publicly renounced his citizenship in that article only to discover that you cannot renounce your US citizenship before you are up to date on your taxes.

A couple of weeks ago he finally settled his tax dispute with the IRS who said he still owed capital gains on the sale of his first house in London, which was not taxable in the UK but taxable in the US.

London Mayor Boris Johnson Settles U.S. Tax Bill Ahead Of Visit : The Two-Way : NPR


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Under U.S. law, citizens must pay the taxes on incomes above $97,600, even if that money is earned overseas. Johnson, as London mayor and as a columnist for The Telegraph, earns nearly $600,000 a year.
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Old 02-08-2015, 01:28 PM   #43
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First, wonderful observations being made. Certainly much appreciated by me.

Honestly, as I have thought about it over the years the conclusion I have come to as a Yank, married to a Yank, is that moving permanent overseas is a pipe dream.

What we are aiming for now is to sell big house. Buy a townhome that can easily be closed up for 3 to 4 months at a time and then rent in foreign destinations for extended periods (but no more than 4 months realistically at a crack).

In this scenario, what is the collective opinion on how to handle healthcare while abroad? Currently not on Medicare, but ACA...
I've heard that WorldNomads.com is very popular for health insurance while traveling/living abroad.

Currently my retiree HI from US ex-employer covers me worldwide. I can go onto their website (BCBS of Louisiana) and find the hospitals and doctors in the BCBS network wherever I am traveling

Last year for example I did the research and kept a list of hospitals and doctors in the network for the places where we were spending most time (Brisbane, MacKay, Melbourne & Hobart). We also took a week-long trip to Vanuatu and I took out the travel and health insurance from the travel agent we used while in Australia.
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Old 02-08-2015, 01:33 PM   #44
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Isn't paying taxes to the IRS On foreign income moot for most early retirees?

Most of the people here have their retirement assets in US institutions?

So the dividends and cap gains would mostly be from US assets?

The more interesting question would be if an EU country that granted a retirement visa would try to get their taste of your retirement income (social security, pension, 401k withdraws, dividends, cap gains, etc).
See my post above, but for the UK/US deal, the UK taxes on worldwide income which includes all the US pensions, cap gains etc.

However, regardless of income you get the first ~$16k of cap gains free of tax, per filer, so $32k for my wife and I. The same is true for stock dividends so for a 100% stock ETF.
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Old 02-08-2015, 01:43 PM   #45
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The more interesting question would be if an EU country that granted a retirement visa would try to get their taste of your retirement income (social security, pension, 401k withdraws, dividends, cap gains, etc).
The distribution of taxes between countries is governed by two sets of domestic tax laws and their interaction through the relevant Double Taxation Agreement or tax treaty.

If you are granted a residence visa in an EU country then that country will have primary taxation authority and you pay them first. You might be interested to learn that if you live in the UK the DTA specifies that your US SS is only taxable in the UK. There are rules for all the income types you mention that have varying dependencies on citizenship and residency and in some cases you will have to go through a process of "resourcing income through treaty" to make US income look like UK income so that the US will allow a foreign tax credit on the tax that the UK imposes on the US income.
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Old 02-08-2015, 01:46 PM   #46
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See my post above, but for the UK/US deal, the UK taxes on worldwide income which includes all the US pensions, cap gains etc.

However, regardless of income you get the first ~$16k of cap gains free of tax, per filer, so $32k for my wife and I. The same is true for stock dividends so for a 100% stock ETF.
And of course that ETF is chosen to avoid PFIC issues and be HMRC reporting....sorry had to be a geek.
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Old 02-08-2015, 01:53 PM   #47
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First, wonderful observations being made. Certainly much appreciated by me.

Honestly, as I have thought about it over the years the conclusion I have come to as a Yank, married to a Yank, is that moving permanent overseas is a pipe dream.

What we are aiming for now is to sell big house. Buy a townhome that can easily be closed up for 3 to 4 months at a time and then rent in foreign destinations for extended periods (but no more than 4 months realistically at a crack).

In this scenario, what is the collective opinion on how to handle healthcare while abroad? Currently not on Medicare, but ACA...
If you intend to spend considerable amounts of time overseas you need to look at residency considerations, your health insurance and how they interact with the ACA and the IRS form 8965. If you maintain residency in the US you could buy an ACA plan that covers you overseas or just have a plan that works in the US and buy an extra repatriation and catastrophic plan piecemeal for wherever you visit.
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Old 02-08-2015, 02:06 PM   #48
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Yikes what a load of headaches.

You really have to love being able to stay more than 3 months at a time to deal with 2 or more national taxing authorities.

Your aggregate tax bill may be higher.

But wait I thought the UK didn't tax income earned outside the UK? That's why there are so many russian oligarchs (kleptocrats) and Arab sheikhs living in London?
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Old 02-08-2015, 02:09 PM   #49
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And of course that ETF is chosen to avoid PFIC issues and be HMRC reporting....sorry had to be a geek.
Absolutely, which is why we are taking 5 tax years to get financial ready for the move, part of that is selling MF's and buying HMRC recognized ETF's to minimize the taxes once we move.

The point to make in this general thread of retiring overseas is to do lots of research ahead of time to understand the tax implications for whichever country you are considering moving to.
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Old 02-08-2015, 02:12 PM   #50
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I know that threads can take on a life of their own but this is turning into a tax thread. Is this really the place for that or should someone with a big interest in the tax issues of retiring overseas, not start a new thread on that specific topic and leave this thread for other issues related to retiring overseas? An equally as complicated topic would be pension implications which could be a separate thread or combined with a tax thread.

I certainly didn't start this thread to try and go into issues that require very specific and expert knowledge. Again, such issues need only be looked at once you have made the initial decision that you are interested in retiring overseas.

LARS, think carefully about the move from a house to a townhouse or condo. My wife found it unbearable to live in a condo. There were 3 main reasons. Sound proofing is rarely 100%, no private outdoor space, rules that either you don't like or someone else ignores and you don't like that.

Re travel insurance, there are plenty of providers but the devil is in the detail of the policy. You must read it. Most don't. Some require you to return home to make a claim for example. Not much fun if you have a big hospital bill to pay out of pocket while you are travelling. Some do not cover what you thought they covered. Most complaints about travel insurance are actually a result of the traveller not knowing what they were and were not covered for. You hang a camera on a chair arm in a restaurant and it gets stolen. Not covered. Yes, you had coverage for the camera being stolen but you did not have coverage if you did not exercise 'due caution'.

Again, not a topic to do with 'should you retire overseas'.
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Old 02-08-2015, 02:29 PM   #51
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I know that threads can take on a life of their own but this is turning into a tax thread. Is this really the place for that or should someone with a big interest in the tax issues of retiring overseas, not start a new thread on that specific topic and leave this thread for other issues related to retiring overseas? An equally as complicated topic would be pension implications which could be a separate thread or combined with a tax thread.

I certainly didn't start this thread to try and go into issues that require very specific and expert knowledge. Again, such issues need only be looked at once you have made the initial decision that you are interested in retiring overseas.

LARS, think carefully about the move from a house to a townhouse or condo. My wife found it unbearable to live in a condo. There were 3 main reasons. Sound proofing is rarely 100%, no private outdoor space, rules that either you don't like or someone else ignores and you don't like that.

Re travel insurance, there are plenty of providers but the devil is in the detail of the policy. You must read it. Most don't. Some require you to return home to make a claim for example. Not much fun if you have a big hospital bill to pay out of pocket while you are travelling. Some do not cover what you thought they covered. Most complaints about travel insurance are actually a result of the traveller not knowing what they were and were not covered for. You hang a camera on a chair arm in a restaurant and it gets stolen. Not covered. Yes, you had coverage for the camera being stolen but you did not have coverage if you did not exercise 'due caution'.

Again, not a topic to do with 'should you retire overseas'.
I think all those topics are relevant. For US citizens taxes loom larger than for other nationalities and if cost of living and making your money go farther are considerations taxes are important. But there are obviously other considerations too that might be more important in getting people initially interested. However, a holistic approach is required to successfully in move abroad.
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Old 02-08-2015, 02:36 PM   #52
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But wait I thought the UK didn't tax income earned outside the UK? That's why there are so many russian oligarchs (kleptocrats) and Arab sheikhs living in London?
UK taxes people that are ordinarily resident in the UK on their worldwide income. You can live in the UK for extended periods but be formally resident elsewhere and avoid tax on non-UK income and you can also pay a fee of 30k GBP to avoid UK tax. That's small change to most oligarchs so the UK is a popular place for them.
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Old 02-08-2015, 02:51 PM   #53
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If you intend to spend considerable amounts of time overseas you need to look at residency considerations, your health insurance and how they interact with the ACA and the IRS form 8965. If you maintain residency in the US you could buy an ACA plan that covers you overseas or just have a plan that works in the US and buy an extra repatriation and catastrophic plan piecemeal for wherever you visit.
I am assuming that 3 to 4 month stints (then returning to US) will not trigger any tax issues and you avoid all the residency/tax compliance nightmare being discussed. Am I wrong?

Quickly reviewed Nomads (thanks, Alan) and from what I saw it looks to be an Accident policy. In other words, if you have a heart attack, which isn't related to travel, they will not cover.

It would seem that you need to really understand what your US policy covers overseas for extended visits.
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Old 02-08-2015, 02:54 PM   #54
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UK taxes people that are ordinarily resident in the UK on their worldwide income. You can live in the UK for extended periods but be formally resident elsewhere and avoid tax on non-UK income and you can also pay a fee of 30k GBP to avoid UK tax. That's small change to most oligarchs so the UK is a popular place for them.
+1

The time I spent 7 months in the UK I was very careful not to become formally resident, and I did this in part by having the 7 months spread over 2 UK tax years (UK tax year is April 6 to April 5) and while there we also took a couple of vacations abroad to Europe and to Ireland.

After returning to the US I got a letter from my UK bank who had noticed from ATM withdrawals that I been in the UK for a long period and I had to complete an HMRC form stating the number of days I'd been in the UK that year and the previous 4 years. The letter was quite apologetic really, saying that HMRC required banks to monitor customers who were non-resident for tax purposes and rat them out if they thought they had slipped back in. (I'm paraphrasing here )
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Old 02-08-2015, 03:01 PM   #55
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I am assuming that 3 to 4 month stints (then returning to US) will not trigger any tax issues and you avoid all the residency/tax compliance nightmare being discussed. Am I wrong?
Absolutely correct for the UK.

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Quickly reviewed Nomads (thanks, Alan) and from what I saw it looks to be an Accident policy. In other words, if you have a heart attack, which isn't related to travel, they will not cover.

It would seem that you need to really understand what your US policy covers overseas for extended visits.
Ah, not looked at WorldNomads in detail, just heard about it.

I'm very fortunate that one of the options I have with my retiree insurance is a PPO plan that covers foreign travel. To be quite honest I am sure BCBS would rather we got sick while abroad. We had lunch recently with a couple of friends from where I used to work. He is also retired on the same HI policy and while in Austria his wife took ill and required treatment. He had to pay up front and was amazed, a) how cheap it was, and b) that the HI claim he put in on return to the US paid in full (no co-pay).
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Old 02-08-2015, 03:08 PM   #56
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To be quite honest I am sure BCBS would rather we got sick while abroad.
My experience as a HCP in Canada supports this. On the rare occasion when we had a US patient insured by BCBS, they really really wanted the patient to complete their hospital stay in Canada.
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Old 02-08-2015, 03:12 PM   #57
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My experience as a HCP in Canada supports this. On the rare occasion when we had a US patient insured by BCBS, they really really wanted the patient to complete their hospital stay in Canada.
I'll bet they did
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Old 02-08-2015, 03:14 PM   #58
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I'll bet they did
I phoned them every day for 10 days until they eventually agreed to transfer a patient just to get rid of me!
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Old 02-08-2015, 03:20 PM   #59
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Absolutely correct for the UK.



Ah, not looked at WorldNomads in detail, just heard about it.

I'm very fortunate that one of the options I have with my retiree insurance is a PPO plan that covers foreign travel. To be quite honest I am sure BCBS would rather we got sick while abroad. We had lunch recently with a couple of friends from where I used to work. He is also retired on the same HI policy and while in Austria his wife took ill and required treatment. He had to pay up front and was amazed, a) how cheap it was, and b) that the HI claim he put in on return to the US paid in full (no co-pay).
Just checked my BCBS documents and they refer to BlueCard Worldwide for coverage outside of US. I will call during working hours to see if the plan we currently have provides BlueCard. If not, will have to figure what policies do.
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Old 02-08-2015, 03:21 PM   #60
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I am assuming that 3 to 4 month stints (then returning to US) will not trigger any tax issues and you avoid all the residency/tax compliance nightmare being discussed. Am I wrong?

Quickly reviewed Nomads (thanks, Alan) and from what I saw it looks to be an Accident policy. In other words, if you have a heart attack, which isn't related to travel, they will not cover.

It would seem that you need to really understand what your US policy covers overseas for extended visits.
If you just go somewhere on a tourist visa there will be no tax consequences, but make sure you understand the max number of days you can stay. You'll have to keep ACA compliant health insurance and if you want one that covers you worldwide you'll probably have to get a more expensive one that covers out of network hospitals....I know mu Unicare policy covers me for emergencies overseas, but would not pay for the costs of a medical flight back.
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