Retired Tax Advantages Of Living In Los (us Citizens)

[stevehaigh]

are there any tax advantages to living abroad when taking distributions from IRA/401ks and social security is non resident in US?

i didn't think so at first but them i played arround in turbotax. i created a mythical return for a 70 year old getting $1500/mth social security and $1500/mth IRA distribution. the federal tax came to $1114.

then i filled in the 2555 form and declared $1000 foreign earned income under "physical presence test " rules and the tax droped to $771!

can anyone explain this of give me a pointer to tax rules for retired ex-pats?

thanks

[lanny]

I don't know what you did, but there is no way that you could have reduced your income with Form 2555. I can only think that you included some of the IRA or social security money in the income shown on that form. However, only current earned income, i.e. income from current personal services, qualifies for the exclusion. Whether you use the physical presence or the bona fide resident rule should make no difference.

Your retirement income is not taxable in Thailand but there are no provisions to reduce the tax on such income by the U.S.

Only if you are working on a job currently is there any tax advantage to being outside the U.S.

In fact, there is one drawback to living here if you are drawing social security. If you are covered by Medicare, you get no benefits here. Medicare will only pay for services rendered by U.S. health care providers to Medicare participants in the U.S.

[stevehaigh]

I don't know what you did, but there is no way that you could have reduced your income with Form 2555. I can only think that you included some of the IRA or social security money in the income shown on that form. However, only current earned income, i.e. income from current personal services, qualifies for the exclusion. Whether you use the physical presence or the bona fide resident rule should make no difference.

Your retirement income is not taxable in Thailand but there are no provisions to reduce the tax on such income by the U.S.

Only if you are working on a job currently is there any tax advantage to being outside the U.S.

In fact, there is one drawback to living here if you are drawing social security. If you are covered by Medicare, you get no benefits here. Medicare will only pay for services rendered by U.S. health care providers to Medicare participants in the U.S.

no, i didn't do that. i simply entered $18,000 for IRA and $18,000 for SS and got fed tax due of $1114. then i added $1000 in foreign earned income and the tax due fell to $771.

i didn't find any explanation for this so far but i'll keep looking.

steve

[stevehaigh]

i just increased the foreign earned income to $20,000 and the total income on my return fell to $-1,000 resulting in a tax liability of 0. so turbox tax is applying the foreign earned income credit to my US IRA distribution income.

bere in mind i'm just creating test tax returns here. i wonder of anyone has ever done this on a real tax return?

[naka]

Sorry, but being a US citizen you are well and truly screwed.

The U.S. NEVER gives their people a break, tax wise ... solly. ( Australia, same same)

Naka.

[elGrande]

are there any tax advantages to living abroad when taking distributions from IRA/401ks and social security is non resident in US?

i didn't think so at first but them i played arround in turbotax. i created a mythical return for a 70 year old getting $1500/mth social security and $1500/mth IRA distribution. the federal tax came to $1114.

then i filled in the 2555 form and declared $1000 foreign earned income under "physical presence test " rules and the tax droped to $771!

can anyone explain this of give me a pointer to tax rules for retired ex-pats?

thanks

Maybe you are entering the $1000 as a Foreign Tax credit of some type. Either way the tax and the savings are minimal.

[KhunPadThai]

The main tax advantage to living abroad for Americans is avoiding state income tax. Even some US states that don't have an income tax turn around and tax dividends and interest, such as New Hampshire. Here in New York City state and city income tax can easily come to 11% so escaping it could be important. In the absence of state income tax doing a Roth conversion might make more sense as well.

Although health care is much cheaper in Thailand, I don't know how likely it is to get insurance for older people.