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.
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).
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.
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!
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.
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.
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!