Earlier quoted context omitted.
I'm going to assume they didn't know what they were talking about as my employer is US based. And by legal definition, the income I'm getting from them is foreign sourced income at least 330-365 days of the year. I'm taking the FEIE deduction yearly. Source doesn't mean what it does to the layman for intl taxes.
I didn't ask "why", I asked "how". That someone wants to pay SS and Medicare in order to accrue rates (planning to come back and perhaps retire in the US at some point, keeping options open), but was advised there is no way to accrue those rights without US income, even if they pay out of pocket.
I'm a digital nomad. Should I renounce my US citizenship?
81–90 of 93 posts
Re: I'm a digital nomad. Should I renounce my US citizenship?
#82Earlier quoted context omitted.
You file quarterly tax returns and pay the IRS. If you have a full-time job in the US your employer normally deducts and pays those taxes as part of payroll processing.
In context, the question is this: Mr X is a US citizen who lives outside the US, files and pays US taxes (with deductions taken for locally paid taxes). Mr X wants to also pay into social security and medicare (and whatever other right accrual systems) so that, if they decide to go back to the US so that -- when they retire -- they are entitled to social security benefits and medicare coverage. The question is: How d…
https://www.irs.gov/individuals/international-taxpayers/soci...
If Mr. X has no US-source income and earns income in a country with no totalization agreement with the US he can save the money he’s not paying for Social Security and Medicare in a savings account, IRA, etc. it’s not like the government-run programs are paying high interest.
Re: I'm a digital nomad. Should I renounce my US citizenship?
#83The one example of someone who maybe should renounce their American citizenship, Boris Johnson, and who in fact did renounce it https://www.theguardian.com/politics/2017/feb/08/boris-johns... was not a digital nomad. So hey if you have a citizenship somewhere else that is among one of the cool, slightly respecting rights of citizens countries in the world, and you never want to go to the U.S because reasons (includin…
There are plenty of accidental Americans who don’t even realize they are citizens. Also, if you have concurrent Chinese citizenship, you are supposed to renounce one or the other when you turn 18. Pricey, since renouncing citizenship doesn’t come cheap, but at least you’ll avoid the wealth tax if you don’t have any yet. This will be an issue in 10 or so years considering the anchor baby trend in the last decade or so…
Wait, renouncing citizenship isn't just signing some documents? WTF?
Re: I'm a digital nomad. Should I renounce my US citizenship?
#84Earlier quoted context omitted.
If the goal is to get more people health care, then letting them deduct visits for cheaper care in the country they reside in would be a good thing. It more strain on the US healthcare system and the planet to have expats traveling back for a procedure and the deduction would be less because the healthcare cost is less. And remember the reaction to the House press secretary Jen Psaki saying the US would provide vacci…
Yes, we can imagine all kinds of ways the US health care system could work better. I was just mentioning that US citizens have to pay for Medicare regardless of where they live, and it’s not excluded with FEIE. And Medicare doesn’t work overseas. That’s the reality we have to live with. What could or should happen in our opinions is a different question, not really relevant to this topic. Personally, my goal was trav…
> Those are noble goals I suppose but not something I want to spend my time on.
This is really why I should donate to the "abroad" political arms. Both Republican AND Democrats agree on fixing Medicare, FBAR, etc. because citizens abroad are always an afterthought. I wouldn't mind being an afterthought if it wasn't sapping the biggest part of my paycheck while being utterly useless to me later in life or sucking out all of my time come tax season.
Re: I'm a digital nomad. Should I renounce my US citizenship?
#85Earlier quoted context omitted.
Yes, we can imagine all kinds of ways the US health care system could work better. I was just mentioning that US citizens have to pay for Medicare regardless of where they live, and it’s not excluded with FEIE. And Medicare doesn’t work overseas. That’s the reality we have to live with. What could or should happen in our opinions is a different question, not really relevant to this topic. Personally, my goal was trav…
> Those are noble goals I suppose but not something I want to spend my time on. This is really why I should donate to the "abroad" political arms. Both Republican AND Democrats agree on fixing Medicare, FBAR, etc. because citizens abroad are always an afterthought. I wouldn't mind being an afterthought if it wasn't sapping the biggest part of my paycheck while being utterly useless to me later in life or sucking out…
It doesn’t make sense to me to voluntarily donate money to politicians when you are complaining about taxes. You can write your members of Congress for free.
For a self-employed person Social Security is 12% on the first $147K of self-employment income, maxing out at $18,228/year. Medicare is 2.9% on the first $200K and 3.9% on income over $200K. So for a person making $200K+ the total of those is 12% + 3.9% = 15.9%.
For a person with a regular employer (you mentioned “paycheck” in your comment) the employer pays half of those taxes, so the employee portion is a little less than 8%.
That’s a significant chunk of income paid for Social Security and Medicare but I wouldn’t call it “the biggest part.”
Americans living abroad can collect Social Security, so that part is not necessarily utterly useless. Currently Medicare benefits only pay for treatment in the US, but in that case the percentage of income paying into that is no more than 2.35%.
If you have parents or relatives on Medicare you are actually funding them, think of it that way. Because of demographic changes America has a growing aged population and a shrinking population of young people. If you want to address that problem have more children.
If preparing and filing tazes is sucking out all your time come tax season maybe get a professional tax preparer to do it for you. I have been self-employed for over a decade, earning well over $150K/year, lived overseas more than half that time, and I never spent more than a couple of hours a year preparing and filing my taxes. Some people have more complex tax situations than others but most returns are not that complex if you keep your records and receipts organized.
Re: I'm a digital nomad. Should I renounce my US citizenship?
#86Earlier quoted context omitted.
Yes, we can imagine all kinds of ways the US health care system could work better. I was just mentioning that US citizens have to pay for Medicare regardless of where they live, and it’s not excluded with FEIE. And Medicare doesn’t work overseas. That’s the reality we have to live with. What could or should happen in our opinions is a different question, not really relevant to this topic. Personally, my goal was trav…
> Those are noble goals I suppose but not something I want to spend my time on. This is really why I should donate to the "abroad" political arms. Both Republican AND Democrats agree on fixing Medicare, FBAR, etc. because citizens abroad are always an afterthought. I wouldn't mind being an afterthought if it wasn't sapping the biggest part of my paycheck while being utterly useless to me later in life or sucking out…
Estimates of Americans living overseas vary from 5 million to 9 million. A lot of those are retirees (presumably past the age of contributing to Social Security and Medicare), and government employees and military posted overseas. The number also includes students (generally not earning a taxable income), "accidental" Americans who got citizenship by birth (like Boris Johnson). Actual expats and nomads are probably a fairly small number.
It would be nice if US tax laws and Medicare and so on accommodated expats and nomads. That would likely benefit me. But I chose to live an unusual and minority lifestyle as a nomad, so I have to take the good with the bad. It's not worth my time, effort, or money to get involved with political lobbying on a niche issue that doesn't interest or concern the vast number of US citizens or the people in Congress who might make changes. The government will always have bigger and more pressing issues than unfair taxation of expats, and we will always be a tiny minority of constituents.
More than once I have encountered Americans who interpret my choice to live abroad as somehow "abandoning" my country, or running away from it. And most Americans don't know about taxes on expats/nomads, they assume that if I live in, say, Thailand I am not paying US income taxes. When I explain that Americans are taxed based on citizenship they are surprised -- why would an American who lives and works in the US know about that? Likewise Americans are usually not aware that getting a tourist visa to visit the US (for a foreigner) is often difficult and time-consuming -- they have never had to deal with USCIS. So that presents a political challenge: the expat/nomad lifestyle is not something the majority of Americans (or their elected representatives) understand or care much about.
Good luck with the uphill battle. There is an advocacy/lobbying organization for Americans living abroad:
https://www.americansabroad.org
Of course they ask for money. I choose not to get too involved with trying to reform the government or tax policies. It's a fact of life I can deal with, I have better things to give my attention to.
Re: I'm a digital nomad. Should I renounce my US citizenship?
#87Earlier quoted context omitted.
There are plenty of accidental Americans who don’t even realize they are citizens. Also, if you have concurrent Chinese citizenship, you are supposed to renounce one or the other when you turn 18. Pricey, since renouncing citizenship doesn’t come cheap, but at least you’ll avoid the wealth tax if you don’t have any yet. This will be an issue in 10 or so years considering the anchor baby trend in the last decade or so…
Wait, renouncing citizenship isn't just signing some documents? WTF?
Not for Americans. You have to pay a few thousand dollars first, and then the wealth tax.
https://www.forbes.com/sites/robertwood/2015/10/23/u-s-has-w...
Re: I'm a digital nomad. Should I renounce my US citizenship?
#88Earlier quoted context omitted.
> double that for a married couple Only if your spouse also qualifies, which isn’t necessarily just because they have an ITIN (oh, and it only applies to their income, and not yours…which often won’t work out if your spouse is earning local wages). SS and Medicare aren’t collected on income earned abroad, but you also have to be careful because your credits towards benefits don’t accrue either. I quickly dropped the…
Digital nomads generally aren’t getting permanent residency or work permits, so they aren’t paying local taxes wherever they happen to stay. Longer-term expats and retirees will have different visas and tax situations.
A lot of countries require you to pay local income taxes even if you don't have permanent residency or a work permit (as long as you do the work in country, you are supposed to pay taxes on what you earn from it). But they have no way of tracking the worker's income, so won't know unless somehow they happen to find out about the tax fraud.
Re: I'm a digital nomad. Should I renounce my US citizenship?
#89Earlier quoted context omitted.
Digital nomads generally aren’t getting permanent residency or work permits, so they aren’t paying local taxes wherever they happen to stay. Longer-term expats and retirees will have different visas and tax situations.
A lot of countries require you to pay local income taxes even if you don't have permanent residency or a work permit (as long as you do the work in country, you are supposed to pay taxes on what you earn from it). But they have no way of tracking the worker's income, so won't know unless somehow they happen to find out about the tax fraud.
Can you name any countries that tax foreigners who work there without a work permit (or a visa that allows remote work)? Suppose I'm a US citizen working for a US company while I enjoy living in Thailand. I don't have a work permit in Thailand. Technically (according to Thai immigration and labor law) I am not allowed to work at all, so I'm breaking the law. In practical terms there's no way for the Thai authorities to enforce those laws unless I go around telling everyone I'm running a business or working for a foreign employer. If I try to pay taxes there without a work permit I am either going to get confused looks or deported.
The US is like this -- it's illegal to work in the US without a work permit or visa that allows work. If a French citizen comes to the US on a tourist visa and works for their employer remotely they are technically violating the conditions of their tourist visa, which prohibits any kind of work. Practically there's little to no enforcement for people working on laptops from coffee shops.
I'm not saying I don't believe you, I just haven't heard of any country requiring local taxes unless you have a work permit or some kind of visa that specifically allows you to work remotely. I can't see how those governments would enforce that unless they raided every coffee shop and hotel room looking for foreigners with laptops.
I know some countries have so-called digital nomad visas that allow working for a foreign employer remotely. I don't think that's what you're describing, though.
Re: I'm a digital nomad. Should I renounce my US citizenship?
#90Earlier quoted context omitted.
> Those are noble goals I suppose but not something I want to spend my time on. This is really why I should donate to the "abroad" political arms. Both Republican AND Democrats agree on fixing Medicare, FBAR, etc. because citizens abroad are always an afterthought. I wouldn't mind being an afterthought if it wasn't sapping the biggest part of my paycheck while being utterly useless to me later in life or sucking out…
Estimates of Americans living overseas vary from 5 million to 9 million. A lot of those are retirees (presumably past the age of contributing to Social Security and Medicare), and government employees and military posted overseas. The number also includes students (generally not earning a taxable income), "accidental" Americans who got citizenship by birth (like Boris Johnson). Actual expats and nomads are probably a…
Normally I share your sentiments because it's not really worth the fight and I can understand the situation and why generally "no one cares", but in a comment section, I'm more inclined to put how I really feel. I've been out of the country for a while so I know the numbers, but it still really sucks. It sucked when I got lower priority for COVID vaccines because the embassy didn't want to comment, and it sucked seeing (understandably) the local government shrug preferring their own citizens. It sucked when I forgot my FBAR because it didn't cross my mind as being unreasonable to have additional funds where I live. It sucked reading and hearing stories of expats learning too late that they were not going to get health care. It sucks when I can't open banking or crypto accounts because of the passport I hold and the government agencies related to it.
It's compounded though because of the other side: host country. They don't have a modern definition of "work" and so the rules put you in a gray zone so you can't or it would be prohibitively expensive to start a business and hire workers to meet the business requirements for visas (and sole-proprietorships not being allowed to foreign residence)--all for a self-employed remote work which only requires internet, a computer, and caffeine. If I could pay local taxes, then I could support the local community and subtract it from the US side. And I'd rather pay taxes to the local community. Applying for local citizenship is daunting and requires a long residency period and being on a wait list. Some countries like Estonia make it a lot easier.
It is a non-standard and often glamorized lifestyle, but it is filled with so many caveats.