[plugger]

from my understanding the US is the only G20 country that taxes citizens living and working abroad. given that I'm not sure your statement makes sense about when you should give up your US citizenship, as you'll still be out of pocket if you earn less than $200k pa.

On the flip side currently if you renounce your US citizenship it immediately triggers a 5 year back tax audit by the IRS and you have to clear your bill before they'll let you renounce.

[idontwantthis]

No you're not really if you know what the FEIE is. You don't get taxed on the first $112,000 of earned income this year. It's one extra page you need to file with your taxes. That means no income tax on any earned income up to that amount.

"Income tax" on "earned income" does not include Social Security, medicare/caid tax so you still pay some. It also doesn't cover "unearned" income like capital gains or rent.

I said earn > $200k because I'm sure citizenship is worth at least $88000 per year to most people. You would also need to be very confident that that income level is never going to to go away.

Further, most developed countries where you would be more likely to be earning that much money have tax reciprocity treaties with the US that cover the rest of your earned income.

[plugger]

I understand what FEIE is. but as you said, it's the first $112k. BUT, you still have to file every year, which incurs a time and financial penalty. W2 forms aren't designed for mere mortals to fumble their way through, so most outsource it to a tax accountant at a financial cost. Also, tax accountants abroad that specialise in US tax law are both rare and expensive.

> medicare/caid tax so you still pay some

exactly. You're still 'on the hook' annually to pay for subpar services you'll most likely never use, assuming they exist when you're eligible for them.

> I'm sure citizenship is worth at least $88000 per year to most people.

I'm sorry, but that makes me laugh HARD. By your math I would have paid approximately $1.9 million dollars in the past 21 years just to hold the US passport I might have used 10-15 times in that timeframe to gain entry to the US. Do you honestly think the right to visit the US 15 times over 2 decades is worth $2 million USD? Especially when you can visit the US without a US passport fairly easily (assuming you're not a cryptobro acting like a fool?).

Full disclosure, I'm a US expat who's lived in Australia for over 20 years and was granted Australian Medicare YEARS before I was a permanent resident.

[idontwantthis]

That’s great you’ve found a home in a country with similar security and stability to the US. None of what I’m saying matters to you because you found a new home to pay taxes to.

There’s no good reason for you to keep your US citizenship just like there’s no good reason for the average Australian citizen to gain US citizenship.

This is in the context of digital nomads who probably aren’t seeking citizenship in Australia or a similar country.

Ending US citizenship purely for tax avoidance without considering FEIE (like this article does) aimed at a target audience of young people who probably don’t know much about where they are going or how taxes work (digital nomads) is not smart.

[gregjor]

If you make more than $100k a year a few hundred dollars a year for professional tax prep shouldn’t be a big deal. And the cost of tax preparation and advice is deductible.

US citizenship has benefits beyond the passport. What that is worth depends on the individual. People from all over the world wait years for US visas and work permits, so there’s some value and demand implied.

I have children and family in the US, so I don’t put a price tag on my passport. Any place desirable enough for me to get citizenship there and renounce my US citizenship is going to tax me too.

[anonymoushn]

If it cost "a few hundred dollars a year" and less than 1 day of my time I would be ecstatic. That is nothing like what it actually costs.

[gregjor]

I don’t know your situation. I pay around $250 for professional tax prep (CPA and IRS enrolled agent). TurboTax costs about half that. It takes me much less than a day every year, maybe two hours. People who have high incomes and complex tax situations can probably afford to have someone else deal with their taxes. Tax advice and preparation, either by a person or software, is deductible on your tax return.

Your mileage may vary, but for most people considering the digital nomad thing taxes are not complex or expensive. Very few nomads I met in six years traveling made a lot of money. Their main hassle was self-inflicted: not setting up a US address and keeping a US bank account before they went traveling.

[mschuster91]

You should not be forced to file taxes for a country you do not live in. Even if there are reciprocity agreements in place.

[gregjor]

Yeah there’s always a difference between how the world actually works and how each of us think it should work. The advice here is for the reality-based contingent who want to minimize their tax obligation. For the rest there’s Cryptoland.

[anonymoushn]

Sure yes. Those people should definitely renounce.

[gregjor]

When Cryptoland or some other libertarian fantasy country actually exists and issues usable passports. Until that happens, most likely never, US citizenship is not terrible.

Renouncing citizenship requires finding another country that will give you citizenship, preferably a country with a strong passport and lower taxes than the US. That option really only makes sense for the wealthy.

[anonymoushn]

Because the U.S. prefers to penalize market participants who provide services like market making and reward market participants who speculate for periods of at least 1 year, all of my income is taxed at income tax rates but none of it is "earned income."