• About Us
  • Contact Us
  • Privacy Policy
  • Terms
  • Unsubscribe
No Result
View All Result
Live and Invest Overseas
FREE REPORT
BEST PLACES TO RETIRE
*No spam: We will NEVER give your email address to anyone else.
  • HOME
  • COUNTRIES
    • Top Destinations
      • Portugal
      • Panama
      • Belize
      • France
      • Colombia
      • Dominican Republic
      • Thailand
      • Mexico
      • Spain
      • Argentina
    • Browse All Countries
    • Best For
      • Retire Overseas Index
      • Health Care
      • Cost of Living
      • Investing in Real Estate
      • Editor’s Picks For Retirement
      • Establishing Residency
      • Starting an Online Business
      • Single Women
      • Playing Golf
  • BUDGETS
    • Super Cheap ($)
      • Cuenca, Ecuador
      • Chiang Mai, Thailand
      • The Philippines
      • Las Tablas, Panama
      • Granada, Nicaragua
    • Cheap ($$)
      • Algarve, Portugal
      • Medellin, Colombia
      • Boquete, Panama
      • Carcassone, France
      • Buenos Aires, Argentina
    • Affordable ($$$)
      • Abruzzo, Italy
      • Barcelona, Spain
      • Las Terrenas, Dominican Republic
      • Puerto Vallarta, Mexico
      • Costa de Oro, Uruguay
    • Luxury On A Budget ($$$$)
      • Ambergris Caye, Belize
      • Paris, France
      • Panama City Beach Area
  • Real Estate
  • ARCHIVES
    • Living & Retiring Overseas
    • Raising A Family Abroad
    • Foreign Residency & Citizenship
    • Offshore Diversification
    • Our Latest On Coronavirus ⚠️
  • Making Money
    • International Real Estate
    • Banking
    • Employment
    • Investing
  • CONFERENCES
  • BOOKSTORE
Live and Invest Overseas
  • HOME
  • COUNTRIES
    • Top Destinations
      • Portugal
      • Panama
      • Belize
      • France
      • Colombia
      • Dominican Republic
      • Thailand
      • Mexico
      • Spain
      • Argentina
    • Browse All Countries
    • Best For
      • Retire Overseas Index
      • Health Care
      • Cost of Living
      • Investing in Real Estate
      • Editor’s Picks For Retirement
      • Establishing Residency
      • Starting an Online Business
      • Single Women
      • Playing Golf
  • BUDGETS
    • Super Cheap ($)
      • Cuenca, Ecuador
      • Chiang Mai, Thailand
      • The Philippines
      • Las Tablas, Panama
      • Granada, Nicaragua
    • Cheap ($$)
      • Algarve, Portugal
      • Medellin, Colombia
      • Boquete, Panama
      • Carcassone, France
      • Buenos Aires, Argentina
    • Affordable ($$$)
      • Abruzzo, Italy
      • Barcelona, Spain
      • Las Terrenas, Dominican Republic
      • Puerto Vallarta, Mexico
      • Costa de Oro, Uruguay
    • Luxury On A Budget ($$$$)
      • Ambergris Caye, Belize
      • Paris, France
      • Panama City Beach Area
  • Real Estate
  • ARCHIVES
    • Living & Retiring Overseas
    • Raising A Family Abroad
    • Foreign Residency & Citizenship
    • Offshore Diversification
    • Our Latest On Coronavirus ⚠️
  • Making Money
    • International Real Estate
    • Banking
    • Employment
    • Investing
  • CONFERENCES
  • BOOKSTORE
No Result
View All Result
Live and Invest Overseas
No Result
View All Result
Home Offshore

Overseas Tax Strategies

Lief Simon by Lief Simon
Apr 15, 2013
in Offshore
0
You can mitigate your taxes overseas with the right Overseas Tax Strategies.
210
SHARES
3k
VIEWS
Share on FacebookShare on Twitter

How To Reduce Your Tax Burden Living And Investing Overseas

Today is tax day in the United States. Too late to do anything about your 2012 taxes other than to file a last-minute extension if you need to. Meantime, you can (and should) begin to think about ways to mitigate and manage your tax burden going forward.

To that end, you may be wondering: Is it possible to reduce your U.S. tax bill by going offshore?

It depends who you are and, most important, where your money comes from.

The one and only true option for an American to eliminate his or her U.S. tax burden is to work overseas earning no more than US$97,600. Do that and you can avail of the foreign earned income exclusion (FEIE, which is US$97,600 for 2013). You have to qualify for the FEIE. You do this by being a bona-fide resident of another country or by spending 330 days or more in another country. Remember, though, that, depending on where you live and how your situation is structured, you could be liable for income taxes in the country where you’re living and working.

Obviously, this doesn’t work for everyone. Not everyone is looking to move overseas and get a job…and, even if that’s your goal, the truth is, it’s not easy to get a job in a country where you don’t hold a passport.

The bigger tax advantage for you as an American going offshore is to take your business offshore with you. In this case, you can work for yourself, thereby qualifying for the foreign earned income exclusion. Structure things properly, and you can also defer taxes on the profits from your offshore corporation until you pay those profits out in the form of salary or dividends.

This tax deferral is, in fact, similar to contributing to an IRA or 401k except that instead of handing your money over to an anonymous money manager, you’re reinvesting in your own business. Note, though, that, as U.S. person running your own business offshore, you still could contribute to an IRA or 401k, taking advantage of those tax-deferral strategies, as well, if you’d like.

IRA contributions are limited if you earn a certain level of income. 401k contributions are limited, too, but these can total up to US$67,000 (US$17,000 personally and US$50,000 from the business). Taking those tax deferrals along with your foreign earned income exclusion means you could move up to US$165,000 out of the business tax-free or tax-deferred annually. Then you can leave whatever profits the business earns beyond those levels in the business…again, deferring any potential U.S. tax.

Meantime, you could take your IRA and your 401k funds offshore if you want. To be able to take your IRA funds offshore, you simply need a custodian who allows for offshore investments. The IRS rules for IRAs limit investments that would qualify as “self-dealing.” They do not, however, limit the types or locations of most of your investments (other than collectibles).

Mainstream custodians such as Schwab and Fidelity don’t allow you to make offshore investments with IRA funds they’re managing for you simply because they only make money when you invest in stocks, bonds, or mutual funds. They aren’t set up to administer investments in real estate (foreign or U.S., both of which, again, the IRS does allow). That’s why you need a custodian who does allow these kinds of “alternative” investments (Midland IRA is one such custodian).

The easiest way to manage your offshore investments in your IRA is to set up an offshore LLC in which your IRA invests. Then you, as the managing member of the LLC, can direct the investments from there. As far as the custodian is concerned, your IRA is invested in the LLC. That’s all the custodian knows and that’s all the custodian needs to know. This structure keeps your custodian fees low and allows you greater flexibility and control.

You can invest 401k funds in offshore investments, as well, and, in this case, you don’t even need a special custodian. With a solo 401k, you can act as the plan trustee. The main difference between investing IRA funds offshore and investing 401k funds offshore is the tax form filing requirements. With an IRA, your custodian handles all the tax form filings. With a 401k, you have to file the forms (Form 5500 or 5500-EZ).

In both cases, it’s important to be aware of the investment constraints. Again, no self-dealing or dealing with immediate family is the biggest no-no. Your IRA cannot buy a piece of investment real estate from you personally, for example. Your IRA also can’t lend you money. It can, however, lend money to a third party.

As I said, too late to take advantage of any of these strategies on your 2012 tax return due today. But today is also the day to begin taking action so you can benefit from these opportunities starting with your 2013 tax return and beyond.

Lief Simon

P.S. The real estate investor overseas enjoys additional tax advantages, both in the United States (if he’s an American) and, sometimes, in the country where he invests, too. These are covered in detail in my wife Kathleen Peddicord’s new book, “How To Buy Real Estate Overseas,” released last week and available online here.

Continue Reading: Wealth Tax In Spain

Tags: Foreign Earned Income ExclusionIRA OffshoreIRS Tax Filing RequirementsLief Simonself directed IRATax DayTaxes For Americans Overseas
Share84Tweet53
Previous Post

Where To Own Real Estate Overseas

Next Post

Diversification Is The Key To Survival

Lief Simon

Lief Simon

Lief Simon has lived and worked on five continents and traveled to more than 60 countries. In his long career as a global property investor, Lief has also managed multimillion-dollar portfolios of rental properties, for others and for himself. He offers advice on international diversification in his twice-weekly Offshore Living Letter and monthly Simon Letter dispatches.

Related Posts

Adobe Stock/dudlajzov
Lifestyle

My Biggest Regret After Living In Bellapais, Northern Cyprus

by Robin Davie
June 21, 2022
0

Above Kyrenia, Northern Cyprus's main tourist town, perched in the foothills of the Kyrenia Mountain Range, is the unbelievably beautiful...

Read more
General view of apartments for rent in Portimao, Algarve, Portugal

The Best Property Deals To Expand Your Portfolio Offshore

June 10, 2022
Panama City, Panama to theleft and Tavira, Portugal to the right

Panama Vs. Portugal: Comparing The Five Flags

April 18, 2022
Sunset in Puerto Vallarta, Mexico

Assessing Your Best Overseas Residency Options

March 1, 2022
Sunrise view of old town skyline in Paris

Will Living Abroad Make You Happy?

February 14, 2022
Beautiful afternoon in Porto, Portugal

You May Be Surprised At How Low Taxes In Europe Can Be

February 10, 2022
Cuenca, Ecuador

How And Why To Obtain Ecuadorean Citizenship

December 3, 2021
Next Post
world flags in line below a mountain trail with blue skys

Diversification Is The Key To Survival

Start Your New Life Today, Overseas

A world full of fun, adventure, and profit awaits! Sign up for our free daily e-letter, Overseas Opportunity Letter, and we’ll send you a FREE report on the 10 Best Places To Retire In Style Overseas Today.







LIOS Resources


  • New To LIOS
  • Ask An Expert
  • Media Center
  • Contact Us
  • FAQs

Quick Links


  • Best Places To Live
  • Best Places To Retire
  • Finding A Job Overseas
  • Real Estate

Sign up for our free daily e-letter, Overseas Opportunity Letter, and get your FREE report: The 10 Best Places To Retire Overseas In 2022

  • About Us
  • Contact Us
  • Privacy Policy
  • Terms
  • Unsubscribe

© 2008-2021 - Live and Invest Overseas - All Rights Reserved.

No Result
View All Result
  • Home
  • Countries
  • Budgets
  • Archives
  • News
  • Events
  • Bookstore
  • Newsletters
  • About Us
  • Members Area
  • Contact Us

© 2008-2021 - Live and Invest Overseas - All Rights Reserved.

Sign up for FREE and learn how to live the good life on a modest budget, find bargain property, and more. Plus, check out our free report on the 10 BEST PLACES TO RETIRE.

RETIRE OVERSEAS AND LIVE LIKE ROYALTY

The World’s Best Places To Be In 2022?

Discover Them Here…