US Expats & Taxes

[amanch38]

I'm moving from the US to Hong Kong in the near future and am trying to better understand how my taxes will be impacted.

Does anyone know if I'd be paying the same US taxes I'm used to or additional taxes on-top?

Thanks!

[Counting Beans]

Very dependent on how much you make and if you're a US citizen

[fth]

If you are a US citizen or a "resident foreign alien" in US parlence and not from Roswell, you are potentially liable. Generally the concept is when overseas on the federal side (state is different) your first c. US$100,000 of earned income is excluded (depending on rent bills). After that you top up dollar for dollar for taxes as if you lived in the usa if you pay less in income taxes where you are based, which is likely in Hong Kong. If you pay more locally, like I am now in Australia, you get a tax credit.

Pitfalls are:
1. you must file regardless unlike your UK, Aussie peers. In fact only a couple of communist hold outs or failed states try to tax citizens overseas, except Australia where you need to be out for two years.
2. Your MPF, nasty little tax treatment here. In short the filing is a nightmare, but you are unlikely to worry until next year as your employer is exempt in the first year.
3. Avoid any financial advisor recommening offshore mutual, hedge, collective funds for reasons similar to the above. Google "passive foreign investment company", download the IRS document and then try emailing it past a corporate firewall
4. Don't rely on employer sponsored tax advice. They might totally ignore your us tax status as has been my experience with one piece of worc (two times), or ignore their mandate.

I am not an accountant, but this reflects my personal experience of being a US expat from age 3 and discovering the sharp end somewhat later.

[paul9]

2. Your MPF, nasty little tax treatment here. In short the filing is a nightmare,

I have fingers crossed that I won't get audited. Filing MPF is indeed a bloody nightmare.

[DianeExpat]

You usually will not owe the US anything when you move. If you have any other questions let me know.

[traderwu]

US is the only country that tax on worldwide income base on citizenship (included green card holder). I think also Japan adapted this policy recently.

Here is the link to the foreign income credit:
Foreign Earned Income Exclusion

If you have foreign financial account or holding, such as banking or brokerage account, you have to reported to the IRS as well.

This is the reason why many people living overseas are giving up the US citizenship. It is a filing nightmare.

I highly recommend you hire a tax professional to do this.

[dctoki]

My hubby's company provided us an accountant with one of the big four accounting firms and yes, we are still paying a lot of taxes! Uncle Sam gets what Uncle Sam wants!

[olwagner]

US is the only country that tax on worldwide income base on citizenship (included green card holder).

Eritrea is doing it as well

[penguinsix]

If you are doing this as part of a package, negotiate for an accountant to handle the first year's taxes.

The previous posters have touched on the major points. Basically, AFTER YOU QUALIFY (google: physical presence test / bona fide test you can exclude foreign income & money spent on housing (rent, utilities). Meeting this qualification often requires you to delay your first filing until you have been overseas for at least 12 months.

Other tidbits to watch out for:

* In some circumstances, you still may be required to file state income taxes back in the US.
* If you have more than $10,000 US in a bank account here there is a special money laundering form. Google: FBAR
* If you have more than (I don't, like $50k-$100k, there is a second money laundering form. Google: FATCA.
* If you own even a small percentage of a foreign corporation / company, there is a very onerous form you have to fill out. (Form 5471)
* I believe that the income exclusion is like $92,000. Any amount over that is taxed, and taxed at the rate of what it would have been if you hadn't the 92k, not the rate it would be on it's own. For example, if you make $92,001, that $1 is taxed at a rate of 28%, not the lower 10% (as if you only made $1 total). Not sure on this point, but have been told it is out there.

Basically, hire an accountant your first year. It's money well spent.

[cbalex]

If you are doing this as part of a package, negotiate for an accountant to handle the first year's taxes.

The previous posters have touched on the major points. Basically, AFTER YOU QUALIFY (google: physical presence test / bona fide test you can exclude foreign income & money spent on housing (rent, utilities). Meeting this qualification often requires you to delay your first filing until you have been overseas for at least 12 months.

Other tidbits to watch out for:

* In some circumstances, you still may be required to file state income taxes back in the US.
* If you have more than $10,000 US in a bank account here there is a special money laundering form. Google: FBAR
* If you have more than (I don't, like $50k-$100k, there is a second money laundering form. Google: FATCA.
* If you own even a small percentage of a foreign corporation / company, there is a very onerous form you have to fill out. (Form 5471)
* I believe that the income exclusion is like $92,000. Any amount over that is taxed, and taxed at the rate of what it would have been if you hadn't the 92k, not the rate it would be on it's own. For example, if you make $92,001, that $1 is taxed at a rate of 28%, not the lower 10% (as if you only made $1 total). Not sure on this point, but have been told it is out there.

Basically, hire an accountant your first year. It's money well spent.

Very helpful post. Are there additional forms you need to file if you have an MPF? Also can anyone reccommend some accountants in HK that handle or specialize in US taxes?