The Journey: 5 Money Questions For Expats With Wanderlust

By Janet Kidd Stewart
Tribune News Service

WWR Article Summary (tl;dr) Janet Kidd Stewart takes a look at the pros and cons of retiring abroad. Stewart says it is important to consider a sober look at all the transition issues, including taxes, before making a move.

Tribune News Service

Ever wonder about the financial logistics of retiring abroad?

Travel websites make it sound so alluring. “Retire on a shoestring in Belize!” “Check out the freebies for ex-pats in Panama!”

It brings to mind an episode of “The Simpsons” in which Homer, after watching a promotional video, convinces Marge to move to the idyllic Cypress Creek planned community, home of the Globex Corporation.

Of course, just a few scenes in, Marge is drinking heavily out of boredom and Homer’s boss turns out to be a villain.

Don’t let this happen to your retirement. Consider a sober look at all the transition issues, including taxes, before making a move, particularly a move abroad, experts say:
-I’m moving abroad full-time. Do I still have to file a U.S. tax return?

In a word, yes.

“People forget or they don’t know that as a U.S. citizen living outside the U.S., their tax obligations (at home) essentially don’t change,” said Dennis Brager, a Los Angeles tax attorney. “They have an obligation to file a return and potentially pay taxes.”

-So, which tax do I pay?
The first step is understanding Uncle Sam’s long arm when it comes to taxing American citizens living outside the country, notes John Olivieri, a partner with New York law firm White & Case.

“U.S. citizens are taxed on worldwide income, but they’re allowed a credit for taxes paid to a foreign country,” he said. That means they pay the higher foreign rate, and no additional U.S. federal tax, but they don’t get reimbursed for the difference between the two countries’ rates, he said. On the flip side, if the foreign country tax is lower than the U.S. tax owed, the taxpayer will owe the full amount of U.S. tax.

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