As I’ve talked about before, the number one reason I’m moving away from the USA is to save money on taxes. It’s true that I have many other reasons, but taxes are number one. As an American living in America, I am subject to the highest taxes in the history of mankind, and I personally think that’s bullshit. I mean hey! The Scandinavians pay stupidly high taxes too, but at least they get stuff for those taxes like health insurance (as bad as it is), and their taxes don’t go to bomb eight different countries that never attacked them. Nor do they go to bail out bankers, and so on.
So, I’m quite done getting raked over the coals financially by a bankrupt government. I never break the law, I donate to charity every month, and work seven days a week. I always pay my taxes faithfully and legally, but I’m going to move out of the country so I can reduce my legal tax burden.
Is it simple to do? Nope. Not for Americans. America is one of the few countries on the planet that actually charge you an income tax that you must pay even if you don’t live in the friggin’ country. That’s how insane our country is.
To be fair, there is an exception called the Foreign Earned Income Exclusion. This means that if you pretty much stay out of the country all year, you won’t pay taxes on the first $100,000 of income or so. The problem is:
- It doesn’t exclude all taxes, just most.
- Any income over $100,000 is taxed at the higher graduated tax rates America uses. That won’t apply to guys who make less than $100,000, but I make many multiples of that, so I’d still get dinged pretty bad.
- Worst of all, if I stay in the USA more than 35 days a year, I lose the entire exclusion. That’s right. That means I not only have to move out of the USA to get this exclusion, but I can’t come back and visit for more than 35 days per year. If I stay 36 days or more, bam, I’m taxed again.
I plan on spending several months in the USA per year even after I move away in 2021. This means I don’t get this exclusion at all.
But it gets even more complicated.
Most Western countries, including Australia and New Zealand which I’m looking at moving to, can tax worldwide income for non-citizens who don’t live there(!). New Zealand will tax you on worldwide income even if you’re not a citizen if you stay there for more than 183 days per year. Australia, amazingly, may want to tax you as a non-citizen even if you stay one month a year if you return to the same location every time you visit. On year-round worldwide income!
Ridiculous and insane, but that’s the state of the Western world these days.
The slight good news is that most Western countries have treaties with the USA so that if they charge you a tax, you don’t get double-taxed in the USA and vice versa. So, you’ll never pay the same tax twice to two different countries. Not that it helps very much.
Are there ways around this stuff? Sure. One way is to break the law, but I don’t do that. There are other ways, but they’re extremely complicated and would likely cause me great inconvenience. There’s also one “big” way, and that is to renounce my American citizenship.
That is also a little complicated and I’ve discussed that topic on this blog before. I don’t want to do that, but many years down the road I want at least the option of doing this, meaning I need several more passports beyond my American one.
All of this means that even though I’ll be moved out of the country on full time basis by the end of 2021, I will still likely be paying a decent amount of American taxes for several more years until I hash out all of these details. And that’s okay. As I’ve said before, five flags is a long, multi-year process. I play the long game so I’m in no rush.
That, and there are numerous other benefits for me by moving out of the Collapsing USA that have nothing to do with taxes. Those I get much sooner. I first enumerated the reasons I want to do this seven years ago here, but I will soon write an updated article about the benefits of doing so, at least for me, so I can be more clear about why I’m doing this.
Is it worth it to me to stay out of the USA for 330 days a year just to save some taxes on my first $100,000 income? Right now, no. So, for the time being, I will live in at least two locations, one of which being somewhere in the USA (right now that looks like Scottsdale during the winter). But down the road, I will probably feel much differently.
Is it worth it for me to incur the likely possibility that Australia will want to tax my all-year, world-wide income at well over 40% if I go there for just a few months a year? Hell no. That means that Australia has probably been knocked off my list of possible places to live. I haven’t made a solid decision on that yet, but 2021 is rapidly approaching so that decision is coming very soon. New Zealand, despite its dreadful 15% sales tax, is suddenly looking much better.
There’s also South American options like Paraguay or Panama, but with my frequent trips to Asia, those might be complicated. I’ll discuss these options more as I go along with this process.