This week’s Offshore Living Letter by Lief Simon offerred up some very interesting facts about the Fiscal Cliff Deal that many American’s likely don’t know about. It just illustrates that the opportunities for American’s Living in Panama keep getting better! Special guest columnist to OFL, Christian Reeves, addresses the particulars of the eleventh hour fiscal cliff deal –
The very good news for the Americans living abroad: The Foreign Earned Income Exclusion (FEIE) survived and even got a little bump up for the cost of living. If you are living and working abroad, you can exempt up to US$97,600 from taxes in 2013, up from US$95,100 in 2012.
Also, the self-employed expat can avoid unemployment, Social Security, and FICA tax increases (also called self-employment taxes) by incorporating offshore and qualifying for the FEIE. By operating your business through an offshore corporation, you might be able to eliminate these taxes completely, which would amount to a savings of about 15%.
Note, though, that the 2013 tax increases and phase-outs will apply to any ordinary income over US$97,600 and all passive/investment income.
Because the tax brackets ignore the FEIE and expats are taxed on their worldwide capital gains (now at 20% rather than 15%), many higher-earning Americans abroad could be shocked by their 2013 tax bill.
The self-employed overseas, though, have a number of planning opportunities. For example, you could retain earnings over the FEIE amount in your offshore corporation or use a Solo 401-K to shelter income in a retirement plan.
The overseas investor could make tax-advantaged investments through your IRA, thereby avoiding the 20% short-term capital gains tax. In fact, the sophisticated offshore IRA investor can avail of a number of tax advantages – just ask Mitt Romney.
Two Easy Steps To Escape Fiscal Cliffs And Other Government Incompetence
All around, the news these days is bad. But I don’t need to remind you of that. You’re a grown-up. You know as well as I the state of the world right now.
What you may not know is how to pull yourself out of this mess and take control of your own future. How can you make sure you and your family are ok, no matter what the rest of the world decides to do?
It comes down to two simple steps that I’d like to invite you to take starting today.
The information expressed here is solely the opinion of the author. Nothing on this web site or in subsequent communications is to be considered personalized investment advice. Although we may answer your general questions, we are not licensed under securities laws to address your particular investment situation. No communication by any associate or representative of Learn About Panama is to be deemed as personalized investment advice.