From the Publisher's Desk
"In the beginning of a change the patriot is a scarce man, and brave, and hated and scorned. When his cause succeeds, the timid join him, for then it costs nothing to be a patriot."
- Mark Twain, Notebook, 1904"
Living Free Of Taxation!
Live Tax Free Offshore
Taxation - Tax Free Living For U.S. Citizens Offshore
Minor Strings Attached
If you earn up to $92,900 in foreign income, you can sigh with
relief. In addition, you can exclude or deduct certain foreign
housing amounts. and enjoy other benefits.
If you decide to live abroad, following your cash, assets and
investments offshore, there's a very helpful provision of US tax
law you may be able to use to your financial advantage.
The so-called "foreign earned income exclusion" lets a US citizen
who lives and works outside the US to exclude up to $92,900 of
foreign earned income from US income taxes. Both you and your
spouse can earn a tax free $160,000 annually offshore, plus
tax free housing allowances an offshore employer pays. Source -
This is not a tax deduction, credit, or deferral. It's an outright
exclusion of your offshore earnings from gross income, so you pay
no US income tax on that amount.
To qualify for these benefits you must:
1. Establish a "tax home" in a foreign country;
2. Pass either the "foreign residence test," or the "physical presence test";
3. Actually have earned income;
4. Live in the US for no more than one month per year;
5. File a US
income tax return for each year you live abroad.
Usually your "tax home" is where your principal place of business
is located, not where you live. The term "tax home" is broader when
determining eligibility for the foreign earned income exclusion.
Confusion over this point stings many Americans overseas. If you
work overseas and maintain a US residence, your tax home remains
in the US. To qualify for the foreign earned income exclusion
you must establish both your principal place of business and your
actual residence outside the United States.
A complicated test that determines if you get this exclusion involves
counting the maximum number of days you're in or out of the USA. But
the foreign residence test is easier for most taxpayers to pass. You
must establish yourself as a bona fide resident of a foreign country
for an uninterrupted period that includes an entire taxable year;
and you must intend to stay there indefinitely. If you don't pass
this test, you're considered a transient and wont qualify.
US tax law says your residence is a state of mind. It's where
you intend to be domiciled indefinitely. To determine your state
of mind, the IRS looks at the degree of your attachment to the
country in question. A number of factors, none of them decisive,
are examined. The bottom line; you must establish clearly yourself
as a member of a foreign community.
This unusual tax break is only for those who live and earn
offshore. If you need expert advice on this and other offshore tax
matters, contact us. We can even
suggest the best tax-free places to live and work.
The above article by Dr. Charles Freeman, offshore guru and second
nationality/passport expert. See http://www.ptshamrock.com/secret/consultants.htm
See you next issue
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