U.S. Expat investing questions (beginner investor)

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Topic Author
mrmcgillicuddy
Posts: 8
Joined: Tue May 11, 2021 6:52 pm

U.S. Expat investing questions (beginner investor)

Post by mrmcgillicuddy »

Hey all! This is my first post, and I’m stoked to be part of such an awesome group.

Before stumbling on the Bogleheads, all my investments were handled by an advisor. You guys inspired me to take things into my own hands (thank you!)

I’ve been binge-reading this forum and wiki, and my head is spinning.

I found a few threads related to my questions, but not any exact matches, and I’m scared of doing anything wrong. I’m hoping you all can point me in the right direction - sorry in advance if this is too much information!

Here’s some quick background info:
* I am an expat, Colombia is my home base (although some years I only spend a couple months there and the rest “digital nomad-ing” around the world).
* Married, but file taxes separate (wife is not a U.S. citizen)
* I take the FEIE, so I can’t contribute to an IRA.
* Age: 30
* Job/income: Freelancer + other self-employed income. Currently earning ~$35,000/year, but hoping that grows each year.
* Student debt: $16,000 at 4% interest (I think. Right now it says 0% for COVID. I pay this off as slowly as possible because it seems like I can get much higher returns investing that money in Colombia.)
* Roth IRA: $30,000
* Inherited IRA: $55,000
* Real estate investments in Colombia: ~$100,000 worth of property

My tax-advantaged accounts are divided like this:
55% Schwab Total Market Index Fund (SWTSX)
25% Schwab International Index Fund (SWISX)
20% Schwab US Aggregate Bond Index Fund (SWAGX)

What I would love to know is:
I don’t want to have all my eggs in one basket here in Colombia and wish I could contribute to my IRA, but that doesn’t seem possible. From what I’ve read so far, it seems like my next best option would be to start investing in a taxable account.

I’d start with a few hundred dollars per month.

Question 1.) Would my best bet just be to buy total stock market ETF in my Schwab brokerage account each month, and then rebalance everything in my tax-advantaged accounts so my asset classes are still correct?

Question 2.) What kind of tax implications am I looking at if I do that? Is there anything particular I should know to keep them as low as possible?

Question 3.) Is it still true that you can’t buy mutual funds if you don’t consider the U.S. your home (even if you have a U.S. bank account and use a family member’s U.S. address)? If so, does that mean I have to sell all the mutual funds I recently purchased and switch them all to ETFs?

Question 4.) Are there any other important considerations that I’m forgetting? This is the plan I came up with, but I have no idea if it’s actually a good plan.

Thank you so much for your wisdom - I truly appreciate it!
typical.investor
Posts: 2746
Joined: Mon Jun 11, 2018 3:17 am

Re: U.S. Expat investing questions (beginner investor)

Post by typical.investor »

mrmcgillicuddy wrote: Tue May 11, 2021 7:02 pm
Question 1.) Would my best bet just be to buy total stock market ETF in my Schwab brokerage account each month, and then rebalance everything in my tax-advantaged accounts so my asset classes are still correct?
Yes, but you might not need to do much rebalancing. I don't think it will be a problem to hold international in taxable. And one advantage is you can claim the foreign tax credit (which you can't claim in tax sheltered accounts) for amounts the ETF paid to foreign governments. Sometimes it's not such an advantage because the higher dividend rate of international funds makes for more taxable income, but in your zero percent bracket (for qualified dividends) this is not an issue.

Doing so will let you more easily rebalance and you go along via new contributions (your tax advantaged is an inherited IRA where you won't be making contributions correct). You can also turn dividends off in a fund that needs to be rebalanced from and reinvest that into the asset class you need to rebalance into.

And remember your tax bracket and use it to your advantage. The 22% bracket (where long term capital gains and qualified dividend taxation starts) is at $40,526 for a single. So if you make $35,000, subtract your standard deduction of
$12,550 and you are at around $22,500. That means you have about $17,500 in space to do tax gain harvesting. [note: dividends received will reduce the $17,500 so keep that in mind too].

You should sell long term stocks and realize capital gains to bring you up to the $40,526 threshold at which the 0% rate ends.

mrmcgillicuddy wrote: Tue May 11, 2021 7:02 pm Question 2.) What kind of tax implications am I looking at if I do that? Is there anything particular I should know to keep them as low as possible?
See above.

Note: When you exclude income via the FEIE, the excluded income still counts towards your bracket. So for example, someone who excludes $100,000 isn't in the 0% capital gains brackets.

I have turbotax to be helpful here.
mrmcgillicuddy wrote: Tue May 11, 2021 7:02 pm Question 3.) Is it still true that you can’t buy mutual funds if you don’t consider the U.S. your home (even if you have a U.S. bank account and use a family member’s U.S. address)? If so, does that mean I have to sell all the mutual funds I recently purchased and switch them all to ETFs?
Yes, you can not purchase mutual funds. However, you do not need to sell them and dividends will be reinvested if you so choose.
mrmcgillicuddy wrote: Tue May 11, 2021 7:02 pm Question 4.) Are there any other important considerations that I’m forgetting? This is the plan I came up with, but I have no idea if it’s actually a good plan.

Thank you so much for your wisdom - I truly appreciate it!
Just note the Schwab International Fund doesn't contain emerging markets. It's developed only. That might be fine for you.

There is an online calculator here to see what market weighting with Schwab ETFs would be.
https://docs.google.com/spreadsheets/d/ ... sp=sharing

An alternative is to use Vanguard's VXUS which trades, as all ETFs do, commission free at Schwab.

Your plan seems great. Personally, I would want to go more in line with global market weighting and not have a US tilt because the USD and US stocks are pretty high. Other's will say having any international exposure is a mistake.

Nobody really knows what the future will see.

REMINDER: Make sure you are taking advantage of the zero % tax rate on long term capital gains until the 22% bracket. It will increase your tax basis so that when you sell in retirement, you will have less tax to pay.
TedSwippet
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Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: U.S. Expat investing questions (beginner investor)

Post by TedSwippet »

Welcome!
mrmcgillicuddy wrote: Tue May 11, 2021 7:02 pm * I am an expat, Colombia is my home base (although some years I only spend a couple months there and the rest “digital nomad-ing” around the world).
The US has laid a lot of tax traps for citizens living abroad, but your current plan appears to skirt all of them. As it stands then, you look to be in good shape. Just be sure to remain clear of them.

If you have not already found it, our wiki contains a small section that covers some US expat tax issues:

Outline of non-US domiciles - Tax issues specific to US persons living outside the US
Topic Author
mrmcgillicuddy
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Joined: Tue May 11, 2021 6:52 pm

Re: U.S. Expat investing questions (beginner investor)

Post by mrmcgillicuddy »

Thank you so much for the valuable info - you guys seriously rock! I do have a couple follow-up questions if you don't mind (I hope I'm using the quote feature correctly).
typical.investor wrote: Tue May 11, 2021 7:44 pm
Yes, but you might not need to do much rebalancing. I don't think it will be a problem to hold international in taxable. And one advantage is you can claim the foreign tax credit (which you can't claim in tax sheltered accounts) for amounts the ETF paid to foreign governments. Sometimes it's not such an advantage because the higher dividend rate of international funds makes for more taxable income, but in your zero percent bracket (for qualified dividends) this is not an issue.

Doing so will let you more easily rebalance and you go along via new contributions (your tax advantaged is an inherited IRA where you won't be making contributions correct). You can also turn dividends off in a fund that needs to be rebalanced from and reinvest that into the asset class you need to rebalance into.
Ok, I just want to make sure I'm understanding correctly.

So each month, I would buy US Broad Market ETF (SCHB) and International Equity Index ETF (SCHF) within my taxable account. Then, in order to prevent my bond allocation from getting too small, I would turn off dividends within my Inh IRA and Roth IRA for my Total Market Index Fund (SWTSX) and International Index Fund (SWISX). Then, I would take those dividends, and buy U.S. Aggregate Bond Index ETF (SCHZ) within my Roth/Inh IRA to balance everything out.

Is that correct? Or am I totally off?
typical.investor wrote: Tue May 11, 2021 7:44 pm
And remember your tax bracket and use it to your advantage. The 22% bracket (where long term capital gains and qualified dividend taxation starts) is at $40,526 for a single. So if you make $35,000, subtract your standard deduction of
$12,550 and you are at around $22,500. That means you have about $17,500 in space to do tax gain harvesting. [note: dividends received will reduce the $17,500 so keep that in mind too].

You should sell long term stocks and realize capital gains to bring you up to the $40,526 threshold at which the 0% rate ends.
I'm still trying to wrap my mind around tax gain harvesting, but I'm going to do some more research. So, I basically just sell all funds that have a gain until my income + dividends + capital gains - standard deduction = $40,526 ? If so, is there a certain time of year I should do this? And then do I just re-purchase everything the next day?
typical.investor wrote: Tue May 11, 2021 7:44 pm
Just note the Schwab International Fund doesn't contain emerging markets. It's developed only. That might be fine for you.

There is an online calculator here to see what market weighting with Schwab ETFs would be.
https://docs.google.com/spreadsheets/d/ ... sp=sharing

An alternative is to use Vanguard's VXUS which trades, as all ETFs do, commission free at Schwab.
So, basically, instead of buying International Equity Index ETF (SCHF) in my taxable account each month, I would buy Vanguard VXUS instead? And that would make me more diversified and not cost me any more in fees?

I'm still not to the point where I understand market weightings and tilts (my head is already exploding). Right now, I hope to just keep it super simple, then in the future I'll try to continue learning more and more.

Thanks again for all your help!!
TedSwippet wrote: Wed May 12, 2021 3:11 am
The US has laid a lot of tax traps for citizens living abroad, but your current plan appears to skirt all of them. As it stands then, you look to be in good shape. Just be sure to remain clear of them.

If you have not already found it, our wiki contains a small section that covers some US expat tax issues:

Outline of non-US domiciles - Tax issues specific to US persons living outside the US
Thanks for these awesome resources - I'm going to dig into them now!
typical.investor
Posts: 2746
Joined: Mon Jun 11, 2018 3:17 am

Re: U.S. Expat investing questions (beginner investor)

Post by typical.investor »

mrmcgillicuddy wrote: Wed May 12, 2021 7:29 am Thank you so much for the valuable info - you guys seriously rock! I do have a couple follow-up questions if you don't mind (I hope I'm using the quote feature correctly).
typical.investor wrote: Tue May 11, 2021 7:44 pm
Yes, but you might not need to do much rebalancing. I don't think it will be a problem to hold international in taxable. And one advantage is you can claim the foreign tax credit (which you can't claim in tax sheltered accounts) for amounts the ETF paid to foreign governments. Sometimes it's not such an advantage because the higher dividend rate of international funds makes for more taxable income, but in your zero percent bracket (for qualified dividends) this is not an issue.

Doing so will let you more easily rebalance and you go along via new contributions (your tax advantaged is an inherited IRA where you won't be making contributions correct). You can also turn dividends off in a fund that needs to be rebalanced from and reinvest that into the asset class you need to rebalance into.
Ok, I just want to make sure I'm understanding correctly.

So each month, I would buy US Broad Market ETF (SCHB) and International Equity Index ETF (SCHF) within my taxable account. Then, in order to prevent my bond allocation from getting too small, I would turn off dividends within my Inh IRA and Roth IRA for my Total Market Index Fund (SWTSX) and International Index Fund (SWISX). Then, I would take those dividends, and buy U.S. Aggregate Bond Index ETF (SCHZ) within my Roth/Inh IRA to balance everything out.

Is that correct? Or am I totally off?
Not totally off. I think you get it.

However, there is no need to turn off dividends within the inherited IRA and ROTH. I suggested turning dividends off in taxable if ever necessary because once they reinvest, you can't sell to rebalance without tax implications.

In the inherited IRA and ROTH, there is no such consideration. You can just let things reinvest and sell whenever you need to rebalance. Tax sheltered accounts are nice that way.
mrmcgillicuddy wrote: Wed May 12, 2021 7:29 am
typical.investor wrote: Tue May 11, 2021 7:44 pm
And remember your tax bracket and use it to your advantage. The 22% bracket (where long term capital gains and qualified dividend taxation starts) is at $40,526 for a single. So if you make $35,000, subtract your standard deduction of
$12,550 and you are at around $22,500. That means you have about $17,500 in space to do tax gain harvesting. [note: dividends received will reduce the $17,500 so keep that in mind too].

You should sell long term stocks and realize capital gains to bring you up to the $40,526 threshold at which the 0% rate ends.
I'm still trying to wrap my mind around tax gain harvesting, but I'm going to do some more research.
Yes, it's a little bit to understand, but definitely do it once you are comfortable you understand how.
mrmcgillicuddy wrote: Wed May 12, 2021 7:29 am So, I basically just sell all funds that have a gain until my income + dividends + capital gains - standard deduction = $40,526 ?
Yes, You can sell one or as many funds as necessary since you are buying back right away and it won't affect your allocation.
mrmcgillicuddy wrote: Wed May 12, 2021 7:29 amIf so, is there a certain time of year I should do this? And then do I just re-purchase everything the next day?
Since you need to know how much you will receive in dividends, you'll probably want to do it end of year after you know what the final dividend is/will be.

If using ETFs, you can buy back immediately.

If using mutual funds, you want to set them up to use spec id. I think you might have to do a form and setting the Cost Basis method to “Specific ID” t only applies to shares purchased afterwards.

Either way, just make sure you are selling long term holdings (1year +). Otherwise the gains aren't in the zero rate bracket. Spec id (both for ETFs and mutual funds) is the way to choose which shares to sell to make that happen. ETF funds are easy to sell because you can just choose specID on the spot.
mrmcgillicuddy wrote: Wed May 12, 2021 7:29 am
typical.investor wrote: Tue May 11, 2021 7:44 pm
Just note the Schwab International Fund doesn't contain emerging markets. It's developed only. That might be fine for you.

There is an online calculator here to see what market weighting with Schwab ETFs would be.
https://docs.google.com/spreadsheets/d/ ... sp=sharing

An alternative is to use Vanguard's VXUS which trades, as all ETFs do, commission free at Schwab.
So, basically, instead of buying International Equity Index ETF (SCHF) in my taxable account each month, I would buy Vanguard VXUS instead? And that would make me more diversified and not cost me any more in fees?
Correct. You will have the proper allocation of small caps and emerging in VXUS and there are no additional fees.
mrmcgillicuddy wrote: Wed May 12, 2021 7:29 am I'm still not to the point where I understand market weightings and tilts (my head is already exploding). Right now, I hope to just keep it super simple, then in the future I'll try to continue learning more and more.

Thanks again for all your help!!
Keep at it. Tax gain harvesting isn't the simplest topic, but you do want to figure it out. Every dollar that you realize in capital gain now (in the zero % bracket) will save you $0.15 when you sell it to fund retirement expenses. Of course, if you leave an inheritance, you won't have saved anything on that amount because they will get stepped up basis and won't have to pay capital gains taxes but at least it won't have cost you anything (and it's possible tax laws change). Just make sure you are selling long term holdings and mind your bracket limit!

Just FYI, here is info on a fund that contains global market cap weighting. https://www.morningstar.com/etfs/arcx/vt/portfolio

If you are using SCHB and VXUS (both of which are market weighted) the only thing to see from VT is that the US is 56% and Intl is 44%. Vanguard recommends 40% international and Bogle said no more than 20% I think if any.
Topic Author
mrmcgillicuddy
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Re: U.S. Expat investing questions (beginner investor)

Post by mrmcgillicuddy »

typical.investor wrote: Wed May 12, 2021 7:54 am Keep at it.
Thanks for all your sage advice. You are seriously an awesome human being!

It feels great to have a plan verified by someone who knows what they're doing.

And thanks for the reminder about making sure I only use long-term holdings for tax gain harvesting. I purchased all of my mutual funds just a couple months ago (after switching away from my advisor and selling everything they had me invested in), so it sounds like I'd have to wait until the end of 2022 to do my first tax gain harvesting.
Topic Author
mrmcgillicuddy
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Re: U.S. Expat investing questions (beginner investor)

Post by mrmcgillicuddy »

typical.investor wrote: Wed May 12, 2021 7:54 am Keep at it.
Actually one more super quick question for you!

Assuming I keep my taxable income under $40,526, does that mean the only difference between investing in a taxable account vs an IRA is that I pay taxes on non-qualified dividends? Which, with my investments, are very small?

In other words - in my situation, it doesn't really make a difference that the FEIE has taken away my option to invest in my IRA.

Is that accurate?
typical.investor
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Re: U.S. Expat investing questions (beginner investor)

Post by typical.investor »

mrmcgillicuddy wrote: Wed May 12, 2021 10:41 am
typical.investor wrote: Wed May 12, 2021 7:54 am Keep at it.
Actually one more super quick question for you!

Assuming I keep my taxable income under $40,526, does that mean the only difference between investing in a taxable account vs an IRA is that I pay taxes on non-qualified dividends? Which, with my investments, are very small?

In other words - in my situation, it doesn't really make a difference that the FEIE has taken away my option to invest in my IRA.

Is that accurate?
Yes for now. If your income + dividends - exemption exceeds that amount, you’ll be paying taxes on the excess.
Gaston
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Re: U.S. Expat investing questions (beginner investor)

Post by Gaston »

mrmcgillicuddy wrote: Tue May 11, 2021 7:02 pm Question 3.) Is it still true that you can’t buy mutual funds if you don’t consider the U.S. your home (even if you have a U.S. bank account and use a family member’s U.S. address)? If so, does that mean I have to sell all the mutual funds I recently purchased and switch them all to ETFs?
I lived abroad for 20+ years, up until 2014, and I always invested in Vanguard mutual funds every month. I’ve never heard of US citizens (I assume you are a US citizen) not being able to invest in mutual funds in the USA. I always updated my foreign address on the Vanguard website every time I moved, so there was no secrecy on my part. Vanguard knew that I was not a US resident. I did, however, always purchase mutual fund shares using funds from my US bank account. You do, of course, have to file a US tax return every year and declare your gains, but you have to do that anyway regardless whether you own US mutual funds.

I also will add that, while living abroad, I used professional, US-based accounting firms to prepare my US taxes every year. They never cited a concern with purchases of US mutual fund shares, and there were no adverse US tax consequences.

I suggest you call Vanguard (or whichever fund provider you are interested in) and ask them directly. If there is a prohibition on US citizens purchasing US mutual funds while residing abroad, then it must be a relatively new prohibition.

What you DO want to avoid is investing in foreign mutual funds (funds registered outside the USA). The IRS tax and reporting requirements on US citizens owning foreign mutual funds are not friendly.
typical.investor
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Re: U.S. Expat investing questions (beginner investor)

Post by typical.investor »

Gaston wrote: Wed May 12, 2021 6:59 pm
mrmcgillicuddy wrote: Tue May 11, 2021 7:02 pm Question 3.) Is it still true that you can’t buy mutual funds if you don’t consider the U.S. your home (even if you have a U.S. bank account and use a family member’s U.S. address)? If so, does that mean I have to sell all the mutual funds I recently purchased and switch them all to ETFs?
I lived abroad for 20+ years, up until 2014, and I always invested in Vanguard mutual funds every month. I’ve never heard of US citizens (I assume you are a US citizen) not being able to invest in mutual funds in the USA. I always updated my foreign address on the Vanguard website every time I moved, so there was no secrecy on my part. Vanguard knew that I was not a US resident. I did, however, always purchase mutual fund shares using funds from my US bank account. You do, of course, have to file a US tax return every year and declare your gains, but you have to do that anyway regardless whether you own US mutual funds.

I also will add that, while living abroad, I used professional, US-based accounting firms to prepare my US taxes every year. They never cited a concern with purchases of US mutual fund shares, and there were no adverse US tax consequences.

I suggest you call Vanguard (or whichever fund provider you are interested in) and ask them directly. If there is a prohibition on US citizens purchasing US mutual funds while residing abroad, then it must be a relatively new prohibition.

What you DO want to avoid is investing in foreign mutual funds (funds registered outside the USA). The IRS tax and reporting requirements on US citizens owning foreign mutual funds are not friendly.
The restriction has always existed but wasn’t always enforced especially for those who were customers for a long time.

I believe there’s an accounting restriction on how mutual funds pay taxes. Anyway...

Vanguard froze my accounts when I tried to use a foreign mailing address even though I maintained a US one. They wanted a utility bill in my name at the US residence but it was handled by a property manager and the co-owner paid them. That was 2017.
Mutual fund distribution agreements typically mandate that mutual fund owners reside domestically in the United States for two main reasons. First, U.S. fund groups are not allowed to solicit overseas business for their SEC-registered funds, even from U.S. expatriates. Offering shares of mutual funds to non-domestic clients could potentially violate the laws of any country in which an investor or prospective investor in a fund is resident or domiciled. Second, mutual funds may make tax treaty claims on their holdings, which require funds to certify all shareholders are resident in the United States.
https://thunfinancial.com/home/american ... osed-2015/
Topic Author
mrmcgillicuddy
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Re: U.S. Expat investing questions (beginner investor)

Post by mrmcgillicuddy »

Gaston wrote: Wed May 12, 2021 6:59 pm I’ve never heard of US citizens (I assume you are a US citizen) not being able to invest in mutual funds in the USA.
Yeah, I hadn't heard of it either until I started poking around the forum and wiki the other day. But if Schwab doesn't charge commissions to buy ETFs, I'd rather be safe than sorry!
typical.investor
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Re: U.S. Expat investing questions (beginner investor)

Post by typical.investor »

mrmcgillicuddy wrote: Thu May 13, 2021 7:23 am
Gaston wrote: Wed May 12, 2021 6:59 pm I’ve never heard of US citizens (I assume you are a US citizen) not being able to invest in mutual funds in the USA.
Yeah, I hadn't heard of it either until I started poking around the forum and wiki the other day. But if Schwab doesn't charge commissions to buy ETFs, I'd rather be safe than sorry!
At Schwab International (for expats and NRAs), you can’t even see any mutual funds unless you certify you are a non-US person and they will show you some non-US funds.

Same with brokered CDs. They used to be available but you can’t view or purchase them anymore. Not sure why but they have tightened up on complying with regulations in recent years.

So it’s ETFs!!!!
Topic Author
mrmcgillicuddy
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Re: U.S. Expat investing questions (beginner investor)

Post by mrmcgillicuddy »

typical.investor wrote: Thu May 13, 2021 7:28 am At Schwab International (for expats and NRAs), you can’t even see any mutual funds unless you certify you are a non-US person and they will show you some non-US funds.
I think the reason it let's me see them is because I opened my account several years ago when I was still living in the U.S., so I think I just have the normal U.S. account. But yeah, I'm definitely doing ETFs from now on. I don't want any trouble!
typical.investor
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Re: U.S. Expat investing questions (beginner investor)

Post by typical.investor »

mrmcgillicuddy wrote: Thu May 13, 2021 7:38 am
typical.investor wrote: Thu May 13, 2021 7:28 am At Schwab International (for expats and NRAs), you can’t even see any mutual funds unless you certify you are a non-US person and they will show you some non-US funds.
I think the reason it let's me see them is because I opened my account several years ago when I was still living in the U.S., so I think I just have the normal U.S. account. But yeah, I'm definitely doing ETFs from now on. I don't want any trouble!
I had trouble at Vanguard and my accounts were frozen.

Panic at the time, but I was able to keep holding mutual funds, have dividends reinvested and sell. All I couldn’t do was buy anything ... not even ETFs because they don’t want the compliance hassle.

Then I transferred assets in-kind to Schwab International which meant no tax implications. That is what I feared ... being forced to sell a lifetime of taxable investing.

If they can’t take someone due to country of residence restrictions, Interactive brokers usually can.

But if you are in Europe ... European regulations prevent US ETF sales to it’s residents so big headache...
Topic Author
mrmcgillicuddy
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Re: U.S. Expat investing questions (beginner investor)

Post by mrmcgillicuddy »

typical.investor wrote: Thu May 13, 2021 7:45 am Then I transferred assets in-kind to Schwab International which meant no tax implications. That is what I feared ... being forced to sell a lifetime of taxable investing.
Wow, that sounds super stressful! I'm glad you were able to figure everything out! That's one thing I'm worried about - spending years investing, then having some law change for expats and getting screwed.
typical.investor
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Re: U.S. Expat investing questions (beginner investor)

Post by typical.investor »

mrmcgillicuddy wrote: Thu May 13, 2021 7:49 am
typical.investor wrote: Thu May 13, 2021 7:45 am Then I transferred assets in-kind to Schwab International which meant no tax implications. That is what I feared ... being forced to sell a lifetime of taxable investing.
Wow, that sounds super stressful! I'm glad you were able to figure everything out! That's one thing I'm worried about - spending years investing, then having some law change for expats and getting screwed.
Don’t let fear get the better of you. There is always an option of setting up a US LLC to hold your assets. It’s an additional cost and hassle and not really necessary.

My wife is actually more stressful to me on a daily basis than the frozen brokerage ever was ❤️❤️❤️
canga
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Re: U.S. Expat investing questions (beginner investor)

Post by canga »

Are you sure you should be taking the FEIE? I assume you pay local taxes, so you may be better off with the Foreign Tax Credit.

With $35k income, and if you pay any local taxes, then you likely owe no or little US Federal Tax. Plus by using FTC instead of FEIE, then you would be able to invest in a Roth IRA.
Topic Author
mrmcgillicuddy
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Re: U.S. Expat investing questions (beginner investor)

Post by mrmcgillicuddy »

typical.investor wrote: Thu May 13, 2021 7:57 am Don’t let fear get the better of you. There is always an option of setting up a US LLC to hold your assets. It’s an additional cost and hassle and not really necessary.

My wife is actually more stressful to me on a daily basis than the frozen brokerage ever was
Hahaha I love the hearts. I actually do have a single-member LLC. My expat tax guy said if I start earning over $45k-ish, it might make sense to change business structures to save on taxes. I'll worry about that when I get there, though!
canga wrote: Thu May 13, 2021 9:17 am Are you sure you should be taking the FEIE? I assume you pay local taxes, so you may be better off with the Foreign Tax Credit.

With $35k income, and if you pay any local taxes, then you likely owe no or little US Federal Tax. Plus by using FTC instead of FEIE, then you would be able to invest in a Roth IRA.
As far as I understand, I only pay local taxes for the years I spend more than 180 days of the year in Colombia. Last year, we spent most of the year bouncing around from place to place, so I didn't technically have a tax residence. However, the FTC might make sense if I ever do have to pay taxes here though, because if I'm understanding these charts correctly, it looks like taxes are higher here. So it'd wipe out anything I owe in the U.S. But on the other hand, if I chose to do that one year, then I'd forfeit the FEIE for the next 5 years, which might end up coming back to bite me.

I love being an expat, but all these complications sure are annoying!
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