Taxes On Investment Income

[siamamerican]

For Americans living in Thailand with less than 1/2 million in investments, are taxes a big concern. I've read many posts in regards to investment tax concerns. I want to make sure I'm not missing something.

I'm currently married and the first $17,000 of income will not be taxed when I move to Thailand. Currently I itemize and more than $17,000 is exempt, but after moving to Thailand I'll be taking the standard exemptions.

The way I see it, as long as my realized gain is less than $17,000 and investments are my only source of income, I would owe no taxes. The last 2 years my unrealized gains have been far greater than $17,000, but my realized gain from selling stocks or dividends has not come close to $17,000.

I hope that people on this forum that are concerned about taxation are the retirees with a far greater retirement nest egg than me.

[Loom]

For this issue, the only way to be sure is to discuss with a US tax accountant with expat clients. But I'd say your assessment sounds generally correct. As I understand the rules, investment income (unearned income) cannot be offset with the exclusion allowed on "earned income" for citizens living abroad. However, the standard exemptions and deductions would apply to earned income in excess of the exclusion and any unearned income. The rules changed last year so earned income above the exclusion is no longer classified as first income (taxed at a higher rate). But that doesn't seen to be an issue for you.

[lanny]

The rules for calculating your US income tax are no different for those of us living here than for those still in the US, except for the exclusion of "earned" income. So, if you don't have a salary or other form of income from personal services, you do just as you would in the states.

From your description, it would appear that you would have no tax liability. In fact, if your income is solely from dividends and interest, you might not even have to file a return. Only if you have proceeds from sales of stocks and bonds would a return be required.

[Loom]

Maybe I've missed a new development, but as far as I'm aware interest and div income, wherever in the world it is generated, is still taxable in the US for citizens. However, if it's Thai div income there's a 15% Thai tax withheld at the source which can be used to offset the US liability.

[Khun ?]

Sounds like the guy is confused on earning a income ( work) and investment income which is taxed

regardless, if over $400 a year ( capital gains/interest/dividends). $400 may not be an up to date amount. I would also assume the money is being earned thru a U.S. brokerage account and 1099

will be sent to IRS. Thais don't care if money is being earned outside but prefer you spend it in Thailand.

[lanny]

Maybe I need to be more specific in my reply. The $400 Khun ? mentions is the minimum income from self-employment that must be filed so that the self-employment social security tax may be reported. ALL income, from ALL sources must be included; there is no such thing as minimum, above which a tax applies.

Regardless of income source, there are certain minimum amounts, below which IRS does not require you to file a return. In fact, if you are below the minimum and do file, IRS may send you a letter asking you not to file again! For single taxpayers, no return is required if total income is less than $8,450; for joint filers, less than $16,900. These are the general rules and other requirements may apply.

In the case of the OP, his total income is expected to be less than $17,000. At that level, for married taxpayers filing jointly, there would be no tax. Unless there is income from other than dividends and interest, he might not have to file a return. If capital gains make up part of the total, he would have to file but still wouldn't be likely to owe any tax.

The reason for the minimum filing amouts is that no tax would apply for the particular filing status and the minimum lever. The applicable minimum is the combined total of the standard deduction for the status and the personal exemption for the taxpayer or taxpayers.