US Citizens get a raw deal...

[Trumplestiltskin 5,791]

You're still remaining eligible for Social Security benefits too unless you abdicate your citizenship by becoming a citizen of another country, so... yes, it does make sense you'll still pay into the system that will help pay your retirement, even if you're living overseas it still says citizen of USA in your passport. If it doesn't, then you aren't paying taxes.

Yeah but we have the equivalent of Social Security in the UK too - its called National Insurance. In the 5 years that I've lived in the US, I haven't had to pay into that. Nor would I expect to.

[one...two...tree 2,762]

I thought your SS is based on credit or the amount you pay into it. If I became a US citizen and moved back to AUS, I would almost certainly use their much more successful private retirement system. Why should I or my wife be forced to pay into the US system, without actually living here?

What kind of private retirement system? Employee based?

[Trumplestiltskin 5,791]

You're kidding.. So you are telling me that the first $91K is tax-free, yet you have to pay an additional tax to the US if you earn above that amount. Does that apply even if you are already been taxed on this amount in the host country? Americans would basically be double taxed.

From my currently limited understanding - yes, that is the case.

[Ali G. 37]

Yeah but we have the equivalent of Social Security in the UK too - its called National Insurance. In the 5 years that I've lived in the US, I haven't had to pay into that. Nor would I expect to.

Yet if you became a citizen and moved abroad the next day, are people telling me that you are required to pay into it once you earn over $91K?

[Trumplestiltskin 5,791]

What kind of private retirement system? Employee based?

Generally speaking, you get better value from a private pension than you do from Social Security. Same deal in the UK.

[Trumplestiltskin 5,791]

Yet if you became a citizen and moved abroad the next day, are people telling me that you are required to pay into it once you earn over $91K?

You are required to file a tax return in the US, regardless of how much you make. If you hold residency in a country that taxes you on residency (like the UK), then you would have to pay those taxes in addition to filing the income tax return in the US. So you could conceivably be taxed twice.

There are "tests" to establish bona-fide residency in the foreign country, what can be counted as income and whether or how much of the taxes you've already paid can be offset against the US tax requirements.

[one...two...tree 2,762]

Generally speaking, you get better value from a private pension than you do from Social Security. Same deal in the UK.

The UK doesn't have a SS insurance?

[Peikko 1,575]

Katheryn's post on the topic seems sensible - I would imagine the UK would be one of those countries that have a tax treaty deal with the US as well - so the hassle of filing yes, the unfairness of paying probably not.

[Trumplestiltskin 5,791]

The UK doesn't have a SS insurance?

Yes we do, its called National Insurance.

[lovelyalex 99]

I'm no tax advisor but I thought ATLEAST IN THEORY there are things in place that *should* (emphasis on should) reduce the double taxation, which is actually pretty common in a classical tax system in more than one form, like America has.

On top of the exemption of approx $88k earned income (already mentioned) isn't there a foreign tax credit available too? I thought this tax credit can be used to offset part of your US income tax liability against the income taxes paid for the foreign country. It's not something you'd want to handle yourself though and I would think that initially you'd lose out in the short term but in theory get more back come refund time etc.

Its interesting that the UK has tax treatys in place with over 100 other countries and the US has treaties with almost half that amount.

*walks into tax mind field and blows own legs off*

[lovelyalex 99]

Yeah, it's tough getting around all that intuition.

I mean institutions! Damn my typing!!

[DEDixon 39]

capital gains are income. the 88k isn't solely related to paycheck income. this thread should be closed unless one of us is a tax lawyer, because, otherwise, this thread amounts to a lot of misinformation.

[spookyturtle 9,466]

You're kidding.. So you are telling me that the first $91K is tax-free, yet you have to pay an additional tax to the US if you earn above that amount. Does that apply even if you are already been taxed on this amount in the host country? Americans would basically be double taxed.

You should have looked into this before you became a citizen.

[Trumplestiltskin 5,791]

From what I've read if you are resident in the foreign country for at least 330 days of the year, then you qualify for the 91K exemption. If you aren't, then anything you make (below the 91K) would be subject to US income tax.

[Ali G. 37]

What kind of private retirement system? Employee based?

Yes. It's a private retirement system where your employer is required to pay 9% on top of your salary to a private retirement account of your choice. This money can only be accessed once you are 60. The employee then has the chance to supplement this using their own funds. The last article I read about it stated that Australians (on average) have double the retirement amount of the country in second position.

Of course they also have the age pension, which everyone qualifies for after 65, and is means / income tested.