To ensure a smooth tax-filing process, you must be well informed. If you take up residence in a foreign country without exploring the tax ramifications, you may find yourself paying more than you expect to the U.S. government or your home state - as well as penalties and interest.
Some of the important considerations include…
Amount of foreign earned income. You can deduct a substantial amount in earned foreign income from your U.S. taxes.
Your host country. Many countries have tax treaties or conventions with the United States, which will dictate how you file your U.S. taxes.
Which state you most recently lived in. Some states do not have income taxes; others make it difficult to sever your ties with that state.
Rental income and dividends/interest from assets in the U.S. You must pay taxes on these exactly as if you were living in the U.S.
Whether you are self-employed. You must pay self-employment tax on your income, even if you can exclude it as foreign earned income on your income taxes.
Your holdings in a foreign bank account. Any interest in or authority over a foreign financial account over a certain amount must be reported to the U.S. Treasury Department.
Steve Odem, IRS Enrolled Agent, IRS Certifying Acceptance Agent, Australian Tax Agent, Tampa and Lakeland, FL