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Comment by jandrewrogers | Hacker News Reader

> Expats aren’t double taxed but you need to file tax returns to offset taxable income that’s already been taxed.

This is not correct, it is only practically true in trivial cases. Excess taxation is a very real pain point for Americans living overseas, never mind the other indefensible things the US government does to its expats like FATCA.

Many types of income cannot be offset nor or they covered by tax treaties. Every time there is an impedance mismatch between US tax code and foreign tax code, including basic things like classification of income, deductions, and exemptions, you can end up with liabilities in both countries. It is not uncommon to pay more taxes in aggregate as an expat than you would pay in either country separately.

The way the US government, and some State governments, treat American expats is quite fucked.

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what is even crazier, is its not just Americans impacted by this. If you have a green card, but not working in the USA, you're impacted by this mess too.

What's funny is America has some of the longest paths to a Green Card (for Indians and Chinese at least), but is very very happy to tax them as a resident the moment they spend a year in the country.

Indians effectively pay taxes as residents without any permanent residency benefits for decades

Are there any countries where people on a visa don't need to pay taxes like everyone else?

If I got a job in India, would I not need to pay taxes?

In most countries you’re technically supposed to pay taxes even if you’re working there illegally.

They chose to do it under the terms that have been laid out by the US - so obviously, it's _still_ benefitial for them to continue despite being taxed without representation.

I'm a non US citizen nor resident, never have been and probably never will be. Because of FATCA, I had to prove to my Eastern European bank (where I actually am a citizen) that I am not a "US person". That designation has no legal meaning, anywhere in my birth country, yet I had to sign a formal written declaration "I, NAME, declare under penalty of penal law, that I am not a US person", to be able to access my funds again.

USA always overreaches.

> I'm a non US citizen nor resident, never have been and probably never will be. Because of FATCA, I had to prove to my Eastern European bank (where I actually am a citizen) that I am not a "US person". That designation has no legal meaning, anywhere in my birth country, yet I had to sign a formal written declaration "I, NAME, declare under penalty of penal law, that I am not a US person", to be able to access my funds again.

Your bank was terrified of losing access to US markets, so your bank forced you to prove you're not a US person to be super safe about US tax compliance. Seems like your complaint is with your bank, not the US. You're welcome to bank with a bank that has different policies. I have had European bank accounts before and I've certainly never been asked to prove I am not a US person. (On the other hand, I was asked to sign an absurd amount of paperwork that had nothing to do with the US, because it's Europe, and you need thirty-four forms and a notary public to be allowed to even exist.)

> USA always overreaches.

The US doesn't care about you at all.

> The US doesn't care about you at all.

of course not - they're a nobody.

They don't mean the US cares about the individual - the post is about the general level of regulation that the US is able to force upon third parties.

But then again, this is what it means to be sovereign. And to be honest, the US's overreach is not as high as it could've been given how much clout they have. Imagine if it was china in the same powerful position - what would've been the overreach then?

> Your bank was terrified of losing access to US markets, so your bank forced you to prove you're not a US person to be super safe about US tax compliance

It's more that a lot of them got fines a decade ago because of that so now US citizens are just straight up banned from most European banks.

Many types of income cannot be offset nor or they covered by tax treaties.

That's news to me and I've been doing international tax for 15 years. Please, tell me what types of income earned by a U.S. expat isn't covered by a tax treaty?

It is not uncommon to pay more taxes in aggregate as an expat than you would pay in either country separately.

This is objectively false. For an expat, income taxes paid to a resident country are a dollar-for-dollar credit against your U.S. income taxes, and that's on top of the inclusion threshold that doesn't subject the first $X of foreign income to any U.S. taxation at all.

> Please, tell me what types of income earned by a U.S. expat isn't covered by a tax treaty?

I am not a tax person, but selling a house can cause you to owe tax in the US even if you did not owe any tax in the country you are living in (and sold the house in).

Famously one of the reasons Boris Johnson tried to give up his US citizenship (https://www.bbc.com/news/uk-politics-30932891).

You are correct, but this only applies because:

> Unlike the UK, the US levies capital gains tax on proceeds from the sale of a main residence.

I understand why it can feel unfair but by definition this is not "double taxing". The gains on the house were not taxed by the UK which is why he had to pay US taxes.

> selling a house can cause you to owe tax in the US even if you did not owe any tax in the country you are living in

But you’re not being double taxed.

My understanding, despite the fact I'm definitely not an accountant, was that making over $100K abroad meant you would be double taxed on all of it over that amount. I believe I heard many wealthy Americans abandoning their citizenship just due to this fact.

You get credit for the taxes you paid in the foreign country for the amount over that threshold.

That is definitely wrong. You are subject to a single level of tax on your personal income (in the US). But you might have to split it up between multiple jurisdictions if some of that income is earned in another country.

There's US state taxes (for those states that have it), which does not get credited with foreign income tax.

There's a lot of VAT (value added tax, aka sales tax) that gets paid when buying goods. If this was higher than the US's in the expat's country, they don't get a credit (but conversely, if it was cheaper, then they also don't have to backpay...).

You clearly haven’t dealt with many of the edge cases then. If you make over $150k as an expat and have a non-American spouse (MFS, as many expats do) you’re looking at roughly $1-$5k in extra taxes that don’t qualify for the Foreign Tax Credit, and since they’re above FEIE, you effectively get double taxed.

You can then take that to the country you reside, IF they have a tax treaty with the US, and apply for a credit which may or may not be accepted.

On top of this, if you’ve worked hard in the US and saved in a Roth IRA (effectively part of the US pension system), any capital gains/dividends accrued are yearly subject to taxation in your country of residence since most tax treaties pre-date the Roth vehicle. Meanwhile, you’re also obligated to pay tax to the national pension system of your country of residence resulting in a double tax, simply because US pensions are mostly private non-governmental savings.

When Europeans move to the US, the IRS doesn’t say “let’s see how much gains you’ve accrued in your national pension fund and tax them yearly.”

If you make over $150k as an expat and have a non-American spouse (MFS, as many expats do) you’re looking at roughly $1-$5k in extra taxes that don’t qualify for the Foreign Tax Credit, and since they’re above FEIE, you effectively get double taxed.

Yes, if you have a bad accountant. If you're getting double-taxed on your global income as an American expat, your tax preparer is committing malpractice and you should immediately find a new one.

When Europeans move to the US, the IRS doesn’t say “let’s see how much gains you’ve accrued in your national pension fund and tax them yearly.”

Because we have tax treaties that address this with over 100 countries (including Protocols (updates to treaties) that address older treaties which were ambiguous on the issue of retirement income).

You can then take that to the country you reside, IF they have a tax treaty with the US, and apply for a credit which may or may not be accepted

This is false. If the treaty applies, you don't get a tax credit...because you aren't being taxed. Conversely, if you are taxed, you will get a tax credit regardless of whether there is a treaty because all major countries have a foreign tax credit regime.

Always humorous to see people who don't know anything about tax opine like they do just because they read a few things on reddit or HN and suddenly decided they were experts.

No, what's humorous is your insulting tone when you apparently do this for a living but are the one who is misinformed.

Just one example: the Net Investment Income Tax (1), which has been ruled in court to not qualify for the foreign tax credit.

https://www.thetaxadviser.com/issues/2021/nov/tax-treaties-f...

You have to then take that money paid to the US back to your country of residence and hope that their tax officials have any understanding of the situation, and will apply it as a credit against your tax owed.

News flash: Not all countries tax officials know all the rules either. And going to appeals court over $923.65 doesn't really make sense.

On the other hand, I know someone from the UK who moved away and lived in places like Qatar and Oman for 20-30 years, keeping their UK citizenship and paying zero taxes to the UK (and extremely low taxes in the gulf countries).

Then they retired, returned to the UK, sent their kids to subsidized state universities (in the UK), receive free healthcare on the NHS, and receive state benefits for retirees.

They receive all of these state benefits and they paid almost no taxes to the UK government for most of their adult life. Is that fair?

it's not, but it's not the general case and also you realise this is the very opposite of the US: you get taxed when overseas (unless your a large corporation) and then get no benefits when returning because that would be communism.

That's a bit of an exaggeration, social security (state pension) and medicare (state healthcare for retirees) are not perfect but they're not terrible either.

If you were outside the U.S. for most of your working life, it’s unlikely you’d qualify for social security (requires 10 years of work paying into it).

If I don't do any of the dodgy parts of that story but move to another EU country with children they'll also get free school, Healthcare and so on. For this to be "fair" you'd need some global EU contribution scheme OR nobody can move.

But then do the same people making the argument it's not fair to have paid zero taxes believe that welfare isn't "fair"?

I once heard a story of a family living abroad feeling quite bent about this extra taxation that they were paying no reason. But the story ends with the family being rescued by a USMC helicopter and airlifted to safety after a natural disaster, at which point they supposed they had been paying for something after all.

> at which point they supposed they had been paying for something after all.

but they would've been rescued regardless of whether they'd been paying their share of taxes, as long as they're a US citizen.

Thank you for summarizing this so well.

Can you give more specifics?

If you don't like then... uh... come back?

You're free to renounce American citizenship to escape future tax obligations.

Anyway it's not an issue for non-rich expats, you just have to file a tax return which shows you owe $0.

> You're free to renounce American citizenship to escape future tax obligations.

The hilarious thing about this statement is that it costs a few thousand dollars to renounce (as in a fee, paid to the embassy) and they reserve the right to come get you up to ten years later in tax cases.

And IIRC there is some law saying that if you renounce citizenship to avoid taxation, you might never be able to enter the US again.

EDIT: https://en.m.wikipedia.org/wiki/Reed_Amendment_(immigration) (Thanks, ChatGPT!)

You also have to be fully up-to-date with the IRS before you can renounce citizenship!

> You're free to renounce American citizenship to escape future tax obligations.

In theory, yes. I knew someone having a heck of a hard time doing so though. Here's the process:

https://en.wikipedia.org/wiki/Relinquishment_of_United_State...

It's pretty expensive and difficult.

> You're free to renounce American citizenship to escape future tax obligations.

actually you are not free to do that. renouncing citizenship requires a reason other than "to escape tax obligations"

You can spout off "my way or the highway" as long as you think US citizenship is valuable enough that people are going to put up with it. People not expatriating is obviously the desired outcome of those rules, and the alternative is people renouncing their US citizenship (which is becoming more reasonable as the US passport gets weaker, among other factors).

You're missing part of the point, though. Almost no other country in the world has rules like this. The US government provides among the lowest level of services for its citizens out of any first-world government, so there's no reason it needs to be that much more strict. You should be asking why it's necessary if only from a competitive standpoint-- why are other countries able to treat their expats so much more respectfully?

> The US government provides among the lowest level of services for its citizens out of any first-world government, so there's no reason it needs to be that much more strict.

they provide you the world's premier military! That costs a pretty penny.

That's a 'service' provided by the government only if you are an oil baron.

God I hate this argument. This is such an unhelpful, useless thing to say. It doesn't provide any useful or practical suggestions, it's just a way of shutting down conversation.

I'm glad it was brought up though, otherwise other people might think it's as simple as that.

It is not: https://en.wikipedia.org/wiki/Relinquishment_of_United_State...

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