Income tax USA vs. Thailand

[gamb00ler]

I've familiarized myself with the tax rates of both countries.

I see that at the low end TH tax rates are much lower than in US but in the mid range TH is higher.

 

Since I'm retired I won't be using any tax deferral (IRA's/401K/RMF) deductions.   My income will be interest and investment income with a small self-employment (<4$K) portion.  I'm married no dependants and retired spouse.

I'm not good at deciphering the TH deductions/exemptions/special rates that reduce the tax obligation.

Can anyone give me an estimate of how much of a reduction the TH tax deductions give compared to the US deductions/etc?

I'm not a US citizen only PR.  I can abandon my PR status and pay the exit tax which should be 0 for me.

 

Edited July 31, 2019 by gamb00ler
more details

[thailand49]

^{Based on your tax rate I say Don't you are opening a can of worms " I'm not good at deciphering the TH "  that is a good reason not to plus how much do you really actually think you will save?  There are much more things to worry about living here?}

[rwill]

If your income is in Thailand you will have to pay taxes on it in Thailand.  The US exempts a little over $100K from taxes for income earned overseas, to avoid double taxation.  I also believe the first 120K baht or so earned in Thailand is not taxed.

[gamb00ler]

2 hours ago, thailand49 said:

^{Based on your tax rate I say Don't you are opening a can of worms " I'm not good at deciphering the TH "  that is a good reason not to plus how much do you really actually think you will save?  There are much more things to worry about living here?}

I will be living in Thailand soon.  I currently have US based investment income that could be moved to outside of US and thus not taxed by them.  I can make a choice to be taxed as US resident or as Thai resident.  My situation is rather uncommon.  Why not choose the option that yields the best net result after taxes?

[gamb00ler]

2 hours ago, rwill said:

If your income is in Thailand you will have to pay taxes on it in Thailand.  The US exempts a little over $100K from taxes for income earned overseas, to avoid double taxation.  I also believe the first 120K baht or so earned in Thailand is not taxed.

I asked the exact question that I need answered.  My situation is not that common and I have yet to find a web site that provides advice for my circumstances.  I am good at figuring out tax strategies as long as I know the rules and options.

 

The US exemption on foreign earned income removes the obligation to pay federal income and FICA taxes on wage income not based in US.  Self employment income by US citizens (and residents) in a foreign country is still subject to US FICA tax.

 

I am currently a US resident but not a US citizen.  After I leave the US I can choose to be taxed as a US resident (by filing jointly with my wife who is a US citizen) or as a resident of Thailand (abandon my US PR status).

[Time Traveller]

2 hours ago, rwill said:

If your income is in Thailand you will have to pay taxes on it in Thailand.  The US exempts a little over $100K from taxes for income earned overseas, to avoid double taxation.  I also believe the first 120K baht or so earned in Thailand is not taxed.

Ok so there's a few caveats to the US foreign earned income exclusion.

1. Must live outside of the US for 330 days each tax year

2. To get the deduction, you must file a tax return.

3. Exemption is only for earned income - ie. working - and other income such as dividends/rents/royalities etc will still be taxed at same rates as if you were resident of the US.

 

Another point considering is that most countries in the world have higher income tax rates than the US does and combined with the foriegn tax credits you generally would not end up with any extra liability to the IRS anyway. 

[ThomasThBKK]

18 minutes ago, gamb00ler said:

I will be living in Thailand soon.  I currently have US based investment income that could be moved to outside of US and thus not taxed by them.  I can make a choice to be taxed as US resident or as Thai resident.  My situation is rather uncommon.  Why not choose the option that yields the best net result after taxes?

 

Then move it out of the US and be a thai tax resident. 

Move your income into thailand the next calender year and it's tax free as long as it's under the 100k limit per year. If it's over you need to pay some us taxes.

[Time Traveller]

3 minutes ago, gamb00ler said:

I asked the exact question that I need answered.  My situation is not that common and I have yet to find a web site that provides advice for my circumstances.  I am good at figuring out tax strategies as long as I know the rules and options.

 

The US exemption on foreign earned income removes the obligation to pay federal income and FICA taxes on wage income not based in US.  Self employment income by US citizens (and residents) in a foreign country is still subject to US FICA tax.

 

I am currently a US resident but not a US citizen.  After I leave the US I can choose to be taxed as a US resident (by filing jointly with my wife who is a US citizen) or as a resident of Thailand (abandon my US PR status).

Not necessarily. FICA tax - essentially your payment into SocialSecurity fund - is different from the foreign earned income exclusion. However many countries (mostly developed countries) have international social security agreements in place with the US that would stop the double social security taxation requirement. So in those cases you would not pay FICA if you are a resident of a country with the international agreement with the US 

Edited August 2, 2019 by Time Traveller

[Time Traveller]

23 minutes ago, gamb00ler said:

I will be living in Thailand soon.  I currently have US based investment income that could be moved to outside of US and thus not taxed by them.  I can make a choice to be taxed as US resident or as Thai resident.  My situation is rather uncommon.  Why not choose the option that yields the best net result after taxes?

IF you still have US tax filing obligations (eg. US citizens or PRs), then moving investments outside of the US will not help you at all even if you no longer reside in the US.

Foreign income exclusion does not apply to investment income - only earned income - so you'd still pay the same taxes as if you were a US resident.

[Time Traveller]

On 7/30/2019 at 10:25 PM, gamb00ler said:

I've familiarized myself with the tax rates of both countries.

I see that at the low end TH tax rates are much lower than in US but in the mid range TH is higher.

 

Since I'm retired I won't be using any tax deferral (IRA's/401K/RMF) deductions.   My income will be interest and investment income with a small self-employment (<4$K) portion.  I'm married no dependants and retired spouse.

I'm not good at deciphering the TH deductions/exemptions/special rates that reduce the tax obligation.

Can anyone give me an estimate of how much of a reduction the TH tax deductions give compared to the US deductions/etc?

Familiarizing yourself is not enough. It's two complicated and entirely different tax systems and actually I've found that generally speaking, the US personal income tax rates are way lower than Thailand. 

 

Now I say generally speaking, because the 2 countries have different concepts of what counts as income. 

 

In my case, married with 2 children, I found that for combined household income up to around $100k under IRS rules we had no federal tax liability at all (any paid was refunded). This was due to Standard deductions + personal exemptions + child tax credits + with qualified dividends & long term capital gains tax rate of 0%. 

Whereas, when I was in Thailand, once you hit 1,000,000 baht (just USD$32k) in income you're paying a 25% tax rate!

 

But, as you know there are some caveats. The biggest is the type of income you receive. In Thailand, for individuals, Capital gains from stock market investments are excluded from income (that's big). Although, US does give 0% rate on long term capital gains as well. 

Dividends is another one. Thailand offers, if you choose to include them, tax credits based upon the corporate tax rate paid by the stocks you hold. These can be added to your total withholding taxes paid and included in your assessable income you'll most likely you'll get refunded some of that tax paid by the stocks you hold - even if you had no other income.  The US tax code has no similiar system. (Incidentally other countries use similiar systems to Thailand - called Franking credits).

 

Every person's tax situation is different and I highly recommend you read the Revenue dept's page about taxation in Thailand

https://www.rd.go.th/publish/6045.0.html

 

I'd say that for most US taxpayers (99%), you will end up paying more taxes under the Thailand tax system than you ever would in the US. Expecially when you consider other sales taxes and excise duties and so on. You definitely can see things in Thailand are often much more expensive than in the US - alcohol, cars, gasoline, toys etc. So it's not just the direct taxes you need to worry about, but also indirect taxes to consider when comparing your living costs.

 

 

 

 

 

 

 

 

Edited August 2, 2019 by Time Traveller

[gamb00ler]

I don’t really have a choice where I will be living, only on where I pay tax.


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[callmeacab]

Since you are going to be living in Thailand full time, I suggest contacting a specialist in Thai/USA tax situations. Located in BKK. www.aitaxadvisers.com...no, I'm neither a client nor an employee. Just doing the same research and questioning you are.

Edited August 2, 2019 by callmeacab

[JimGant]

This is more of a 'no brainer' than the dialogue would suggest.

 

First, if any income obtained from outside Thailand is brought into Thailand in the next year (or later), it's not subject to Thai taxes. So, point one, have all those investment income streams continue to go to the (US) bank to where it is now going. Get a mail forwarding address (USA2ME works for me) to give to that bank when you finally move to Thailand (don't ever give them your Thai address -- crazy things happen when banks believe you're now an expat). Then, bring the money to Thailand via SWIFT wire, TransferWise, whatever -- but try to make it a year after deposited, tho' that fact would never be investigated by the Thais.

 

So, to make all the above make sense -- and to never ever file US income tax forms again -- renounce your PR (see caveat below). This is a lot easier than renouncing citizenship, and it is done "without prejudice," meaning you can get a visa for a trip to the US easily -- especially with your wife being a US citizen. So, why hang on to PR status -- which means hanging on to being obligated to pay US tax on worldwide income?

 

The only new factor is that of "nonresident alien" withholding at source. This will apply to some of your US investments, tho' not the interest earning kind. Thus dividends will initially be subject to an automatic 30% withholding at source; but by filing a W8BEN form, delineating Thai-US tax agreement, this will be reduced to 15%.

 

Caveat: Standard deduction for married couple, TY2019, is $24,900. Thus, if your AGI is at or below that, no US taxes owed. But if a substantial amount of that is from dividends, and you renounce your PR, then you'll be paying 15%, period -- standard deduction has no play. So, before renouncing PR, do a bogus tax return -- might be better to remain PR, as you'll still not be subject to Thai tax, if you follow earlier guidance.

 

Out of curiosity: What was your AGI in your last US tax return? And how close is that, plus or minus, to what you expect to earn after your move to Thailand? Easy to do number crunching if we have some base numbers.

 

 

[wwest5829]

4 hours ago, callmeacab said:

Since you are going to be living in Thailand full time, I suggest contacting a specialist in Thai/USA tax situations. Located in BKK. www.aitaxadvisers.com...no, I'm neither a client nor an employee. Just doing the same research and questioning you are.

Yep, you are a horse of a different color. All I know is if subject to US tax as Citizen, I have to pay tax on worldwide income. My income after 8 years is about 34K (all in). You might want to talk to aitaxadvisors. I also recommend contacting them. I had talked with them but my income does not warrant any needed help. 

[gamb00ler]

12 hours ago, Time Traveller said:

Every person's tax situation is different and I highly recommend you read the Revenue dept's page about taxation in Thailand

https://www.rd.go.th/publish/6045.0.html

What a poorly written tax guide.  It has internal cross reference errors and no links to other documents that give the details omitted.  It is also 5+ years old.

Edited August 2, 2019 by gamb00ler

[gamb00ler]

10 hours ago, JimGant said:

Caveat: Standard deduction for married couple, TY2019, is $24,900. Thus, if your AGI is at or below that, no US taxes owed. But if a substantial amount of that is from dividends, and you renounce your PR, then you'll be paying 15%, period -- standard deduction has no play. So, before renouncing PR, do a bogus tax return -- might be better to remain PR, as you'll still not be subject to Thai tax, if you follow earlier guidance.

I was just going over the details of how to file 1040NR and noticed the lack of standard deductions.  Even if I abandon PR status I will still have US tax obligations due to IRA/401(k) withdrawals and Roth conversions.

I think the case is CLOSED....  US will be getting their pound of flesh.

[sead]

On 8/3/2019 at 12:04 AM, gamb00ler said:

What a poorly written tax guide.  It has internal cross reference errors and no links to other documents that give the details omitted.  It is also 5+ years old.

What did you expect from a country where 95% 60 million of population/shops aint paying tax

Edited August 4, 2019 by sead