US Citizen Moving to Europe for High-Income Job

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Topic Author
uniqueinvestor
Posts: 7
Joined: Mon Jul 03, 2017 7:20 pm

US Citizen Moving to Europe for High-Income Job

Post by uniqueinvestor »

Hi Bogleheads - I am a US citizen with a job offer at an outpost of a US company located in an attractive European destination, for which I would be paid very generously. My spouse, who is also a US citizen, is working with their employer to secure the ok to work remotely full time and it seems it will be granted. Living in this particular European destination has been a lifetime dream of mine, and I am pretty bowled over to have the opportunity to use my professional degree and be compensated at such a high level to live somewhere that I love, visit frequently, and that is so close to my heart.

I received a lot of useful advice the last time I posted on this forum and was hoping that fellow Bogleheads, particularly those who have taken an expat position or otherwise lived abroad, could provide some financial tips, best practices, or potential caveats, focused primarily on the below areas, but all help is appreciated.

Taxes: I understand this EU country has recently implemented an attractive tax scheme for highly qualified foreign workers, but I also know that the US taxes its citizens wherever they live and earn, so am not sure if this would benefit my family. Additionally, my spouse would continue to work remotely for their similarly well-compensated job that is otherwise located in the US. I have an appointment with a big four tax firm tomorrow to discuss tax considerations more specifically, and the company I would work for would pay for tax filings needed. I would not get tax equalization, but I would receive a large bump in comp that is intended to cover increased costs, taxes among them.

Healthcare: : I've previously received finance-related input from bogleheads in the context of the fact that I have a disease that is considered terminal, but is not visible (i.e. I have hair and don't look "sick" thanks to modern targeted therapy) and I'm not open about it publicly. My previous post on that is here. (viewtopic.php?f=1&t=222578&p=3434153#p3434153) I've now been dealing with it for almost six years, which nearly three times the median expected survival! There are no guarantees in life and I'm grateful for what I've been able to do with the time I have. My potential employer would offer private "expat" insurance that can be used worldwide, including back in the States, and I would also be eligible for care under the country's national healthcare system, which has a very good reputation in general and specifically for treatment of cancer. The medicine I take (for which I was in the clinical trial in the United States) costs $10-15k per month in the US, whereas in this country it is covered under the national healthcare system at an absolutely nominal cost. Any information on the ease of using these "expat" plans, or dealing with a serious disease while living in Europe (with access to public and private EU healthcare plus healthcare in the US) would be greatly appreciated.

Expat / Dual Country Living: Spouse would need to return to the US regularly for meetings and to show face, and we would keep our home in the US. Family would come stay as often as they like (we live in a destination city), we'd ask our housekeeper to pop by once a week or so, would be home once every couple of months, are friends with our neighbors, and would get a lawn and snow shoveling service. Our car is a lease, and we'd likely keep it until the lease runs out so that we and family have something to use when here.

For a sense of our financial picture, excluding our home, we have net worth just south of $1M held in US-denominated cash and a 3-fund portfolio split across tax advantaged and taxable accounts. We have a mortgage of approximately $400k, and I have approximately $140k of student loans held at a relatively low interest rate which I am in no hurry to pay off because if I become disabled due to my illness they can be discharged.

Last year we made about $675k collectively. With this new job for me, spouse and i would together make approximately $900k/year.

Currently our annual expenses (inclusive of servicing our mortgage at a 1.5x paydown rate, and my student loans) are approximately $140k. Our net worth may look low compared to our income because we put a large down payment on our home, both had large student loans, have not been in our professions for many years (we are in our early 30s and needed graduate degrees) and frankly, because once we got to a place where I knew my spouse would be safe if anything happened to me, we made a decision to start using money to reduce friction and increase our happiness with the time we have together. Our expenses would increase if we took the move due to maintaining two households and flights back and forth, but doing the math, the comp increase would more than cover it.

Thanks for the insight I've already gotten from these forums, and thanks in advance for any help this time around. Happy to provide more information on what country / city specifically in a private message.
Startingover2019
Posts: 61
Joined: Thu Oct 17, 2019 7:24 pm

Re: US Citizen Moving to Europe for High-Income Job

Post by Startingover2019 »

You have a terminal illness. Life is short.
Do it. And I would think about selling my house in the states if I had one. You don’t really need it.

However I did marry poorly and I am now a divorced doc in my forties, do not exactly a model for good decisions.

However you seem to be on the right track and need to enjoy whatever time you have left.
mecht3ach
Posts: 30
Joined: Sun Oct 22, 2017 2:39 pm

Re: US Citizen Moving to Europe for High-Income Job

Post by mecht3ach »

First of all, congratulations! What a terrific opportunity.

Secondly, depending on your host country's tax structure, you will probably end up paying relatively little US income tax (caveat: the spouse's job complicates this). I'm sure the accountant will go over all of this with you, but you can likely take advantage of both the foreign earned income and foreign housing exclusion, as long as *both* of you stay out of the US for 330 days out of a 12 month period (which can split across tax years; you would have to file and then amend for the first year if it does split across years, but that is worth it).

Third, I can't help with advice on the healthcare in a foreign country with a serious illness. We just dealt with regular diseases (and with little kids, there were a lot), but we loved the NHS when we lived in the UK, and were so sad when we moved away from that. (I received the best dental care of my life in the UK, as crazy as that sounds from the tired stereotype of British teeth.)

Last, I agree with Startingover2019 about selling your house. Unless you are likely to move back in under a year, or love your house dearly, a house in a foreign country is a hassle. We rented our house to the loveliest tenants you can imagine, and it still drove me nuts. You want to be thinking about your new life in your new country, and not worrying about emergency plumbing repairs back in the States.

Have a wonderful time! Our family's time abroad was one of the most special times in all of our lives. Like you, we were in a place that we loved and visited frequently before our sojourn (and since then as well). We couldn't stay indefinitely for professional reasons, and I'm sure there would be extra complications if we could have done that, but I will always be grateful for that experience.
Nathan Drake
Posts: 599
Joined: Mon Apr 11, 2011 12:28 am

Re: US Citizen Moving to Europe for High-Income Job

Post by Nathan Drake »

What’s your profession?
stockrex
Posts: 95
Joined: Sat Mar 09, 2019 6:28 pm

Re: US Citizen Moving to Europe for High-Income Job

Post by stockrex »

1. Sell house in us
2. figure out healthcare in foreign loc, if needed fly back here for treatment and maintain us healthcoverage.
3. Figure out stuff you want to do and just do it. Heck get a Nordhavn and live off a boat!
Topic Author
uniqueinvestor
Posts: 7
Joined: Mon Jul 03, 2017 7:20 pm

Re: US Citizen Moving to Europe for High-Income Job

Post by uniqueinvestor »

Thanks all! Appreciate the words of support.

I’d prefer not to sell my house for now - if it doesn’t work out I’d want to come home to it. There is the possibility that this posting will be temporary, that in a few years we’ll want to spend some time prioritizing spouse’s career, or that I will become ill. We will definitely reevaluate over time as we get our bearings in our new location.

Nathan Drake, generally speaking I’m a skilled office worker.
Topic Author
uniqueinvestor
Posts: 7
Joined: Mon Jul 03, 2017 7:20 pm

Re: US Citizen Moving to Europe for High-Income Job

Post by uniqueinvestor »

StartingOver — does that mean that the overall tax burden might go down, or just that the taxes I’d otherwise pay in the US are paid to the foreign government? It would be great if less, but my sense when people discuss expat taxes is that the goal is just to avoid paying double, not to receive some overall benefit. Is that generally right?
JAG9
Posts: 1
Joined: Wed Feb 05, 2020 5:11 am

Re: US Citizen Moving to Europe for High-Income Job

Post by JAG9 »

Currently I am an expat and have been for the past ten years...

A few things to consider:

It usually takes 6 months to get adjusted to any new location...give it time and don't try to figure everything out overnight.

I don't believe moving expenses are deductible any longer. Hopefully your employer will cover the costs of container fees and relocation specialists.

We have lived in two different EU countries and while generally speaking the healthcare costs are nationalized and cheaper, the quality of care can be a mixed bag. In my past assignment the doctors were always hesitant to prescribe medicine until it was an extreme need... We too have "expat" insurance. Beware, you usually have to foot the costs out of pocket and submit claims and wait for reimbursement.

Join a facebook expat group for the location you plan to live. The advice offered on these sites are usually most helpful as the posters have already done the research and lived through the experience/hassle of dealing with tax officials/healthcare/relocation/banking challenges in new assignment location.

Depending on the country you are moving to, you may have to register with a local bank in order to pay your bills and host country taxes. The previous country we were assigned to didn't readily accept American debit/credit cards.

Check with your state tax laws, had we done our research before, we would have never kept our house while abroad. Because we maintain a U.S. residence in this particular state, we are still required to pay state income taxes even though my spouse hasn't worked a day in that state.

If you or wife travels back and forth the U.S. frequently, you will have to keep try for tax purposes of days spent in the U.S.

Fortunately, we are tax equalized, so it does help to not have to worry with tax implications in a foreign country.

Best of luck!
Last edited by JAG9 on Mon Dec 28, 2020 4:59 am, edited 1 time in total.
jminv
Posts: 1076
Joined: Tue Jan 02, 2018 10:58 pm

Re: US Citizen Moving to Europe for High-Income Job

Post by jminv »

If you live in a state with income tax, ask the big 4 person specifically about whether your state will still consider you a resident for income tax purposes. There are a few us states that will and where you basically have to move to another state first to get out of income tax obligations. I ran into this issue and I didn’t have a home or any connections other than a drivers license, voters registration, and a professional license. My company used a big 4 firm for the tax returns and this became an issue. Here you are talking about basically maintaining a residence in your state. If you live in a state with income tax, your wife working for the company remotely and coming back for meetings regularly could be an issue.

The foreign earned income exclusion might or might not be all that attractive and anyway only excludes 1/9 of what your new income will be. It’s more attractive for people working in low or no tax countries. Also, the tax you pay depends on what the tax rates will be in your new country versus the USA. If the tax rate is high relative to the USA, your USA taxes will be low and vice versa. The country’s tax treaty with the USA will also matter. It can be an issue if certain mandatory charges in your new country are not considered taxes in the USA.

It’s good you’ll have private cover. European countries differ but in many you need supplemental insurance so you can go to a decent doctor. It’s like that where I am although a foreigners perception is that healthcare is free and universal in my country. There are few doctors who charge only the national health insurance rate - especially in big cities - and they’re not very good. Also check that your private cover will cover your condition from day 1.

It sounds like a fun adventure and I’d do it regardless of the tax issues. Life is short and you want to do this. All the rest is just optimizing the tax aspects of the move which your big 4 consultation can help with.
ivk5
Posts: 1144
Joined: Thu Sep 22, 2016 9:05 am

Re: US Citizen Moving to Europe for High-Income Job

Post by ivk5 »

jminv wrote: Wed Feb 05, 2020 6:38 am If you live in a state with income tax, ask the big 4 person specifically about whether your state will still consider you a resident for income tax purposes. There are a few us states that will and where you basically have to move to another state first to get out of income tax obligations. I ran into this issue and I didn’t have a home or any connections other than a drivers license, voters registration, and a professional license. My company used a big 4 firm for the tax returns and this became an issue. Here you are talking about basically maintaining a residence in your state. If you live in a state with income tax, your wife working for the company remotely and coming back for meetings regularly could be an issue.

The foreign earned income exclusion might or might not be all that attractive and anyway only excludes 1/9 of what your new income will be. It’s more attractive for people working in low or no tax countries. Also, the tax you pay depends on what the tax rates will be in your new country versus the USA. If the tax rate is high relative to the USA, your USA taxes will be low and vice versa. The country’s tax treaty with the USA will also matter. It can be an issue if certain mandatory charges in your new country are not considered taxes in the USA.
+1. OP, it would be helpful to know your current US state of residence and proposed destination country.

Depending on your US state of residence, breaking residency may be anywhere from easy to impossible, and potential benefit may range from zero to 13% of your income. The fact that you are keeping your house may be a problem or may not. The time you and/or your wife spend back in state could be a bigger issue, or not. (For example, if you are a NY resident but spend at least 15 months out of consecutive 18-month period in a foreign country, and spend less than 90 days per 18-month period in NY, you can break residency without regard for "domicile" issues. Link)

Your destination country will tax you and (probably?) your spouse on your worldwide income. The US will also tax you both on your worldwide income. Assuming your destination country has a higher effective tax rate than the US, that is the rate that will primarily determine your total tax burden. On your US taxes, you will likely be advised to claim the Foreign Tax Credit (not the Foreign Earned Income Exclusion) for your foreign-source income. This will likely produce a surplus credit that you can carry forward for up to 10 years (can also carry back 1 year if you had foreign-source income previously). The credits may eventually expire unused unless you subsequently move to and work in a low-tax country, or have other foreign-source income after (if) you move back to the US.

I don't have first-hand experience with how your spouse's work will affect your taxes. I expect you may be able to claim a credit in your foreign country of residence for the taxes paid to the US on her income, which may likely be calculated by apportioning your (pre-FTC) US tax liability based on the proportion her income represents of your total income. The effect of this is that your overall effective tax rate will be determined by the higher-tax jurisdiction (presumably the non-US one), but the US will get its share of your wife's income and you're effectively paying a "top up" to the other country, whereas your FTC may entirely eliminate your US tax liability on your own income.

Important to understand if your destination country has a social security totalization agreement, and if you'll be on an expat contract (certificate of coverage etc) or a local contract (potentially paying into foreign social security system, and potentially hit later by the US's Windfall Elimination Provision).

The issue of impact on your investing could be a thread all its own. Few quick thoughts:
  1. Your wife's US-source income may enable you to make 401(k) contributions, which you likely won't be able to do on your own income - that would be great
  2. Investments that are tax-advantaged in the US often don't enjoy the same treatment elsewhere, even where there's a tax treaty. For example, municipal bonds would be a mistake because the income they generate will probably be taxed by your non-US country of residence. If you make Backdoor Roth contributions, your Big 4 tax advisor should be able to advise you on whether to continue or stop (ie will you have a hard time avoiding getting taxed on the conversion even though you were already taxed on the basis).
  3. Suggest keeping all investments in US due to the horrific PFIC rules on non-US funds/ETFs.
  4. Related to previous point- find a good really low cost way to convert currency back to USD and transfer back to US. People like Interactive Brokers since you can trade at spot rate, no markup. For me Revolut works well, much cheaper than TransferWise for example.
  5. Make sure you are on top of FBAR filing for non-US accounts you do open (even checking account).
halfnine
Posts: 1353
Joined: Tue Dec 21, 2010 1:48 pm

Re: US Citizen Moving to Europe for High-Income Job

Post by halfnine »

We did something similar to you about 15 years ago when we were about your age albeit on a lot lower salary. Haven't made it back home.

We've had positive experiences with national healthcare systems however typically they are much better at providing emergency care than providing for chronic care. At your salary range there will likely be a healthcare package that allows you private care treatment and the ability to skip the line for quicker treatment for non-critical healthcare needs. Considering your medical issues and the fact that the medications you take are free with the national health care system it may be well worth you while to stay around long enough for citizenship if you can.

At your salaries and the fact that life is short, I would simply outsource your tax issues. That said, I have had bad advice from the "experts". So I'd crosscheck their work by posting back on this forum whatever they have determined. Your spouse's situation might be tricky as she may need to have an actual company footprint in the new country. Simply being an employee in a foreign country may not fly on it's own. That is normally only permissible for a short term and not when a resident.

I don't see any problem with keeping your house for now. If you were to sell it you would have to be very cautious that is not a taxable event in the tax year of the country you move to which can be the case even if it is sold before you move. And even if there wasn't any taxable gain in the USA on the sale there could still be a taxable gain in the foreign country based on the currency rate changes from the date of purchase and the date of sale.
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