[tigerlily]

I was reading on another board- a suggestion that Americans moving overseas could move their domicle (not their house, it's more like the place you intend to return to) to a state without income taxes and thereby only have to pay federal taxes on their income (above the tax-free limit of US$ 80K). The exchange rate being what it is, and salaries being what they are in NZ, this may help no one here. But for those who are in the far planning stages in America it might be helpful to think about.

[TJH]

I got another question to tag to that comment. Lets say you make less than $80K USD while in NZ. Therefore, you owe no federal taxes. Do you pay an state taxes if you are from a state which has income tax? Also, on the federal side are you still required to pay social security, etc., or are you just exempt from the income tax?

[Oregonkiwi]

My understanding is that if you don't live in the US, then you won't be a resident of any state and won't pay state income taxes. The federal taxes may still apply because the US government wants to tax you regardless of where you live, but surely states only tax people who live in that state? For example, I just looked in the instructions for my Oregon tax return (it was sitting right next to me), it says "a nonresident of Oregon is taxed only on income from Oregon sources" and "usually if you qualify for the federal earned income exclusion or housing exclusion for United States residents living abroad, you are considered a nonresident".

So unless you earn income from a US source, you shouldn't be liable for state taxes. (I'm no expert, but that's what I get from reading this.)

A very useful booklet to get is "Publication 54, Tax Guide for US Citizens Abroad". You can download it or order it by mail from the IRS website. On the subject of social security and Medicare taxes, it says they "do not apply to wages for services you perform as an employee outside of the US" unless you meet certain specific conditions like working for an American employer.

[jess]

Thanks Oregonkiwi! I had been searching for info on the irs site but had not come up with pub. 54. :clap


...Of course now I actually have to read the darn thing. :wah

J

[tigerlily]

Oregonkiwi- I know Oregon only taxes what the Feds do (we moved to Washington recently from Oregon)- but I think some states are not so friendly. So def check your state's requirements. I understand that having a domicle (even a house that you are renting and do not live in anymore) is enough in some states to get you taxed.

Remember you still file a tax return with the feds even if you only earn $30K kiwi, you are just going through the motions, but it's required.

I have never read anything about SS taxes, I would think not, since it is normally something the employer has to take out for you? But could be wrong on that one.

[toesonthenose]

I have read alot on this and you are all correct. The State dept. position on taxation is that you still are enjoying the protection and benefits of being a U.S. citizen, even if you are abroad. Additionally, you cannot give up your U.S. citizenship, lots of interesting stories around of Americans who renounce their citizenship in Zurich and burn there passport, then cannot leave Swiizerland without the U.S. providing new documents. a guy here in Hawaii has a leter from Colin Powell telling him he will always be American, and always have the rights of a citizen no matter what, short of joining Al Qaeda I reckon. I know some doctors who have worked in NZ and earned more than 80K US, and yes, they get taxed, no SS or medicare though, and no state tax on income. Propety tax does not go away. Only 3 weeks til April 15!
Shaun

[Oregonkiwi]

A very useful booklet to get is "Publication 54, Tax Guide for US Citizens Abroad".

I also just discovered Publication 593, "Tax highlights for US citizens going abroad", which is an easier read than #54.