[abofh]

So, I'll be honest, taxes in the EU are (at the basic levels) near what they are in the US - top-line last-dollar percentage wise anyhow. But in the US there's a massive cottage industry in creating and managing deductions. I'm currently abroad, so while I'm subject to US taxes, the FEIE allows the first 112k to be deducted from income tax (not SS, so not everything but the bulk of it), and while I still expect to touch the 35% tax bracket on my last dollar earned this year, when you factor in the plethora of deductions, my effective tax rate is currently around 10%, and by year end will likely creep up to 17%.

I've lived in a few EU countries over the years, generally under digital nomad programs that exempt from local taxes - but it's still helpful by way of comparison, that right now, if I were to pay at the same rate in my current country, I'd be much closer to 30% than 20%.

Moreover, those earning substantially more than I am are largely not doing it as W2 (employees) or 1099 (contractors), but as investors earning capital gains - which themselves are taxed at a maximum of 20%.

You can add to the US burden state taxes, but some states don't tax income at all (Texas), or they do their taxation based off the federal AGI, so all of your deductions kick in for the state stuff as well.

If by some weird event I was earning 10x what I earn today, you can rest assured my tax rate in the US wouldn't go up from here, but instead it would be restructured into deferred capital gains (stock options), corporate ownership, investment in tax deferred or tax exempt accounts and so forth - because at the point where we're haggling over that much money, it's worth everyone's time to optimize even a 1% difference - by paying someone to do exactly that.

So yes, a 500k salary isn't 500k take home, but without doing anything different than what I'm doing today, it'd be pretty close to a 400k take-home under US tax law.

[gigatexal]

I’m an expat here too and I pay a CPA to do my taxes. (1 rental means a biz return and all the deductions… meh) if you can take home 400k from 500k in gross then you’re doing amazingly well.

[gnicholas]

This sounds too good to be true to me (as a former tax lawyer). If you're being paid 500k in salary I can't think of how you take home this much. Maybe you put a ton into tax-deferred accounts, but that's not the same as netting 80% as take-home. It's kicking the can down the road (to a time when tax rates may be even higher).

[abofh]

The big ones are feie, depreciation on us property, some tax deferred accounts yes. Some of it is indeed kicking the can down the road, but by my estimates I'm near the peak of my earnings power and plan to retire early, so future tax rates for me personally are expected to be on a downslope.

[gnicholas]

What can an individual depreciate that offsets against hundreds of thousands of dollars of wages that are taxed as ordinary income? I get how depreciation helps you if you're renting out apartment buildings, but the tax code revamp of 1986 got rid of the passive investment tricks that allowed doctors/dentists/etc. to offset their ordinary income with depreciation deductions.

Your point about your personal tax rate going down makes sense. Congrats on the impending retirement!

[abofh]

I still have an apartment in the US that's gone from being a primary residence to an investment property - so straight line depreciation on the asset offsets the rental income, then the mortgage interest and SALT deductions still exist on the property itself. It doesn't offset hundred/s/ of thousands of earned income on its own, but the left pocket takes the loss, the right pocket takes the gain so to speak. My first (income) taxable dollar to just above 200k when combined with the FEIE and everything else along the way. There will be capital gains to be paid if the housing market ever recovers and I sell without replacing, but in the mean time it keeps the cash in my accounts.

[gigatexal]

Tangent: are you a former tax lawyer turned dev? What’s your story? I am a sucker for folks that have interesting or non-traditional (CS degree -> sw job) journeys into tech.

[gnicholas]

I did two years of CS undergrad before switching to Econ and Linguistics. Then went straight to law school like a good boy. I worked 7 years in BigLaw and dabbled on the side with a side project. Didn't do the coding myself but knew enough to work closely with the devs doing the work.

One day I posted on HN [1] and it blew up and became the 9th-most popular Show HN. A few weeks later we were in FastCo and dozens of other news outlets, and a couple months after that we won a startup competition at Stanford.

My wife had a baby at that time, so I decided to do the startup full-time to give it a go and also have more time with the baby and supporting my wife's demanding career. The baby is now eight, and it's been awesome to be so involved in her life.

In terms of coding, I'm able to do minor code tweaks here and there, but all the heavy lifting was done by my technical cofounder and a couple excellent contractors. Our main revenue source is actually IP licensing, so having been a lawyer comes in handy!

1: https://news.ycombinator.com/item?id=6335784

[gigatexal]

That’s awesome! Thank you for sharing

[gnicholas]

> If by some weird event I was earning 10x what I earn today, you can rest assured my tax rate in the US wouldn't go up from here, but instead it would be restructured into deferred capital gains (stock options), corporate ownership, investment in tax deferred or tax exempt accounts and so forth

What would you do to go from 200k to 2M without increasing your tax rate, if you're being paid in cash salary? Can you contribute millions to retirement accounts?

[abofh]

That's the trick - if you're being 200k, your ability to negotiate how you're paid is limited, if you're being paid 2MM, you can almost certainly negotiate the payments to be a more tax favored solution.

[Dracophoenix]

Which digital nomad programs have used? Any that you currently recommend?

[abofh]

I'm a big fan of Croatia myself, but their program is one year, not renewable without a break (and starting next year, a full Schengen break), but it'll depend a lot on the lifestyle you want. I want cheap, beaches and quiet at least outside of the tourist season. I've heard good things about Portugals, but no direct experience. Montenegro has announced a two year one that's renewable once that I may give a trial when my current Croatia one runs out, but it's brand new and the government websites are currently under a bit of a DoS so getting details is harder. Germany could be good if you like it there, I think Italy just announced one, and if you're more into the Nordic scene, I think Norway has one.

But I'm primarily in the EU because my partner is here, you can find them in a number of other countries, depending on the lifestyle and culture you want to spend time in. Not all of them are tax free, but most of them are.

Do some googling, there's always an expat services organization that will offer overpriced consulting (but you may still want to use them, it can be frustrating if you don't speak the local languages).

Also ask yourself if you want to find a new home, some nomad years don't count towards permanent residency requirements, so you may be delaying things while you do it. For me that's fine, for you maybe not.

If you've got the liquidity it's usually worth going for a couple weeks before you make any final decisions to scope out the local territory and see if you can operate comfortably, but I'd encourage anyone thinking about it to look into it, you may find a lifestyle you really like better than home, wherever that is.