Planning to settle abroad post-retirement? Here are a few tax tips!

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Most people imagine their retirement nest to be a haven with an amazing view of the sunset each evening. They spend their entire lives saving for their golden years. However, if your retirement plans include settling down in a foreign location, there are certain tax implications you need to be aware of. 

Do Your Research

The first step towards ensuring a proper retirement plan is to research the tax laws of the country you wish to move to. This will give you adequate time to plan your retirement accordingly.

Some countries only tax the income sourced in their own country, which allows the American expats with a US-based income to live tax-free on the said income. However, for countries that tax their residents’ worldwide income, expats will have to pay taxes accordingly. Also, this will affect the residency status, as it would serve them better to rent rather than own property abroad to avoid becoming a resident of that nation.

In some cases, you can also stand to benefit from a number of tax credits applicable to American expats. Thus, it’s essential for you to familiarize with the tax laws of the country you wish to migrate to.

US Tax Rules for Expats

US citizens living in any city across the globe with a net income of at least $12,000 – for the salaried employees, or $400 (for the self-employed lot) are required to file for US tax return.

For people paying taxes in their current state of existence, they are not required to file early. Their deadlines have been extended to June 15, which can further be requested to be extended till October 15, if required.

Diminishing Double Taxation

The best way to avoid double taxation for expats is to claim various tax benefits awarded by the IRS. These are against the taxes paid in a city abroad for the income generated overseas or even income based in the US.

Retired American residents still working part-time or freelance, can claim the Foreign Earned Income Exclusion by filling out the Form 2555 while filing their federal income tax.
This can earn them deductions up to $100,000 deductions on US-based income, as long as they can prove that they meet the IRS criteria for living abroad.

State Taxes


The tax policies for each US state varies and it is important for you to be completely aware of the tax laws applicable in their state before making retirement plans.

Some states expect expats to keep paying even after moving out. In this case, people usually change their state of residence before moving abroad, to avoid being “double taxed” later on.

Reporting your finances

With Foreign Bank Account Report (FBAR), in effect, all Americans including the American expats, are expected to report all foreign holdings in terms of property, bank account details, and other possessions if the cumulative value of the said possessions should exceed $10,000 at any time during the year.
Another rule is that American expats with over $200,000 of foreign financial assets may have to report them on Form 8938, as well.

Form 8938, also known as The Statement of Specified Foreign Financial Assets requires all Americans (including expats) to report “your specified foreign financial assets if the total value of all the specified foreign financial assets in which you have an interest is more than the appropriate reporting threshold.”

To understand all the possible tax implications and possible deductions better, it is advisable to consult professionals and forming a well-informed retirement strategy. Such an approach will save you a generous amount of hard earned dollars, as well as make your transition into the golden years of your life as smooth as silk!

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