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Originally Posted by ladelfina
I'm making a wild guess that 80-90% of Americans working overseas are subject to local income taxes, which in many cases are higher than they would be in the US. I'm not sure why the IRS doesn't do a straight foreign tax credit thing like they do with investments to balance the equation.
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You can file your taxes that way if you like even now. Simply don't use the Foreign Earned Income Exclusion, and claim the Foreign Tax Credit instead. Problem you will likely find is that due to very narrow interpretations by the IRS, only a fraction of your foreign taxes are actually creditable. So even if your overall tax rate is higher where you live than it would be in the US, that won't necessarily protect you from having to send a few extra thousand in tribute to the Old Country.
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Not only are you subject to US tax abroad, but even if you leave for good and renounce your American citizenship, the IRS can claim continued taxes on your worldwide income for as long as 10 years afterwards, if they feel you are doing so for "tax avoidance" reasons. So they assert. How they can prove (or how an individual could disprove) this, I am not sure, nor am I sure what resources they would bring to bear in terms of collection.
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Worse, the INS will treat you with more prejudice than they would an ordinary foreign national. Don't leave any loved ones behind, because you may be denied entry to visit them in the hospital or whatever.
Bpp
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