American expat, pays capital gains tax in USA?

[SpokaneAl]

What about capital gains earned on non-US assets ?  I'm thinking bitcoin here guys.  

In TurboTax,  would bitcoin come under the "stocks" category ?

 

Here is what the IRS says . . .

Tax Treatment:

"For federal tax purposes, virtual currency is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency."
"A taxpayer who receives virtual currency as payment for goods or services must, in computing gross income, include the fair market value of the virtual currency, measured in U.S. dollars, as of the date that the virtual currency was received."
"Transactions using virtual currency must be reported in U.S. dollars" on the tax return.
"Taxpayers will be required to determine the fair market value of virtual currency in U.S. dollars as of the date of payment or receipt."
"If a virtual currency is listed on an exchange and the exchange rate is established by market supply and demand, the fair market value of the virtual currency is determined by converting the virtual currency into U.S. dollars ... at the exchange rate, in a reasonable manner that is consistently applied."


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[ToS2014]

Yes, I pay taxes on capital gains as well.  I have my taxes prepared by a US based company that specialises is expat issues such as this.  Bummer but sometimes you got to 'pay the man'.

[hapacadabra]

Bumping this - because there were a lot of knowledgeable people here!

 

Follow up question... assume the same info... IE.. a self-employed expat making 50k, and paying 7k of Social Security.

 

How do Capital *Losses* interact with this?

Say this person has 5k or 10k of Capital Losses? Does this lower his Social Security burden?

[SpokaneAl]

Bumping this - because there were a lot of knowledgeable people here!
 
Follow up question... assume the same info... IE.. a self-employed expat making 50k, and paying 7k of Social Security.
 
How do Capital *Losses* interact with this?

Say this person has 5k or 10k of Capital Losses? Does this lower his Social Security burden?

Here is what the IRS website says:

If you and your spouse file a joint return with a combined income below $32,000, your benefits are out of reach. For income between $32,000 and $44,000, up to 50 percent of benefits may be taxable, and up to 85 percent if combined income is more than $44,000. For more information, go to Social Security's website.

Capital losses are primarily used to offset capital gains and as a result one can only deduct $3,000 of final net short- or long-term losses against other types of income for that year and must carry forward any remaining balance.

So if you were looking at capital losses to offset a large amount of your regular income, that result would be fairly negligible.


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[Ahab]

As others have said you have to pay taxes on income earned in the USA. If the capitol gains are from US traded stocks, etc. he has to pay the tax. I am a US Navy retiree living in Thailand and my government pension is considered taxable income in the USA. Thankfully my home state of Hawaii does not tax retirement income.

[JimGant]

Quote

 I'm saying... and I'll keep using round numbers... Given 50k income... his total tax burden would be approx 7.5k (15%)... whereas, if he lived in the USA, his burden would be approx 15k (30%).  So I said - he only pays 50% of what he *would* pay, if he was not an expat.

His Social Security is almost exactly 50% of his total tax burden - and that is *all* that he pays, as an expat. The other 50% is wiped out. So, to put it simply - he gets a 50% tax discount. He is well below the threshold (It's 100k+ now?) where the US would stop applying that 50% discount.

Let's try and clarify this mess. Your friend is self-employed in Thailand. Because of the Foreign Earned Income Exclusion, and the related threshold, he pays nothing on these foreign earnings. It comes off on line 21 of Form 1040, thus acting as a deduction from line 22 (Total [gross] Income), and thus, as it filters thru, acting as a deduction from Taxable Income. So, yes, no income taxes on his foreign earned income.But, he still has to pay Self Employment tax (Social Security, Medicare) on this foreign earned income. If he did not get the Foreign Earned Income Exclusion, what you're saying sounds like he'd be paying twice as much in total taxes (income taxes plus self employment taxes) as he would without the nice deduction for foreign earned income. So, the only break in taxes is due to the FEIC.

 

Somehow, it's gotten confused that your friend is collecting his Social Security benefit, not that he's still working and paying Social Security and Medicare taxes, i.e., self-employment taxes.

 

As for capital gains -- and other unearned income -- he'll pay exactly what he would have had he no Foreign Earned Income Exclusion. They punch this number out, so that taxes are then figured as if there weren't any FEIC.

[JimGant]

Quote

 I have my taxes prepared by a US based company that specialises is expat issues such as this

Does he exclude your IRA income and/or private pension payments from US income?

Begin at post 26 on this thread:

https://www.thaivisa.com/forum/topic/1008555-tax-specialist-in-chiang-mai/?page=2