Working remotely from paradise? What it means for your taxes

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“It’s increasingly a computer-based global work environment,” Minott mentioned. “People can travel from country to country or stay where they like.”

The advantages are plentiful. You get to dwell in a trip vacation spot, enhance your high quality of life and probably cut back your price of dwelling.

Just be sure to verify in with your accountant earlier than you board the aircraft.

Know your tax obligations

The overseas tax credit score mitigates the impact of double taxation from each the U.S. and a overseas nation. You’re claiming a credit score for overseas taxes levied on your earnings.

Meanwhile, the overseas earned earnings exclusion means that you can exclude as much as $107,600 in earnings from your taxable earnings within the U.S. for the 2020 tax yr.

Generally, you possibly can’t declare each the credit score and the exclusion. Deciding which one works finest for you’ll rely on your particular person circumstances, together with the size of time you will be away.

Be conscious of the principles

The guidelines round utilizing the credit score or the exclusion are complicated, so work intently with a tax skilled as you propose your prolonged journey.

For occasion, vacationers should meet a set of situations to qualify for the overseas earned earnings exclusion, together with a “bodily presence check.”

You can declare credit score for overseas taxes paid, however the requirement that U.S. residents spend no less than 330 days of the tax yr outdoors the nation to qualify for the overseas earnings exclusion is strictly enforced.

If you are trying for a six-month break from life stateside, you will not get the appreciable tax advantages of a extra everlasting transfer.

“It’s all or nothing,” mentioned David McKeegan, who based Greenback Expat Tax Services in 2009 together with his spouse Carrie. His household relies in Bali although he’s at present on trip in Costa Rica.

“If you’re gone for 329 days, there’s no change [in your tax status],” mentioned McKeegan.

Foreign account compliance

Be cognizant of state submitting necessities

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