The Only Way To Wave Goodbye To The IRS Forever

Say Goodbye To The IRS Forever! A lot of people still seem to think that the main reason to “go offshore” is to avoid taxes.

There are legitimate ways to minimize your U.S. tax bill as an American overseas but I’ve always recommended against Americans using taxes as a reason to go offshore… because, while Americans have been able to (and still can) enjoy some tax breaks by becoming residents of other countries, the reality is that the tax benefits for Americans overseas have always been limited.

An American living and earning an income overseas can take advantage of the Foreign Earned Income Exclusion to exclude his first $130,000 of earned income from U.S. tax (that’s the figure for this year)…

Up until a few years ago, Americans were able to get a tax deferral on retained profits for any U.S.-controlled foreign corporations.

Now, the deferred income of big U.S. companies—think Apple and Amazon—with billions of retained earnings offshore from the United States is taxable in the United States. Those rules hit the little guy, as well.

This change came with the Trump tax reforms of 2017, and we were all given eight years to pay up.

As I said, I’ve never seen taxes as a reason for an American to go offshore (though the tax advantages can be a big benefit for a non-American taking his life across borders). It’s even less so today.

The ultimate strategy for eliminating your U.S. tax bill is to renounce your U.S. citizenship. This is more costly today than ever, thanks to a four hundred percent increase in the associated fees.

Renouncing your citizenship and walking away from being an American for good is also not for everyone, and not only because of the expense.

This is a complicated and potentially emotionally charged decision.

Most people who renounce their citizenship have lived overseas for a long time, obtained citizenship of the country they are living in, and have no expectation of ever traveling to—let alone moving back to—the States.

You cannot renounce your U.S. citizenship without first obtaining another citizenship. You can’t be a stateless individual.

One pro of giving up your U.S. citizenship is that you would no longer have to file an annual tax return with the IRS.

One con is that the U.S. government makes it uncomfortable, if nothing else, if you decide to travel back to the U.S. after renouncing. The fact is, they don’t have to let you back in, even if you have a solid new nationality and passport, like one from an EU country…

The biggest question you have to ask yourself is whether or not you will want to return to the U.S. for travel or any other reason.

One guy I know gave up his U.S. citizenship only to find himself applying for a Green Card a few years later because his wife, who hadn’t given up her citizenship, decided she wanted the kids to finish high school in the States… and he wanted to be with his kids.

When people ask me if I’m ever going to give up my U.S. citizenship, my answer is simple… not likely. I like options, and being a U.S. citizen gives me options to return to the States for travel or to live and work should the need arise.

Stay diversified,

Lief Simon
Editor, Offshore Living Letter