URGENT! Expat taxes: California state taxes, driver's license renewal, foreign tax credit,

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Topic Author
USinUK
Posts: 13
Joined: Wed Apr 03, 2019 7:16 pm

URGENT! Expat taxes: California state taxes, driver's license renewal, foreign tax credit,

Post by USinUK » Thu Apr 04, 2019 4:29 am

I am in desperate need of help, please. I live and work in the United Kingdom indefinitely, with some ties to the US. I have no plans at this time to move back to the US or California (though I could possibly return someday).
CONTEXT
In the USA, I have: a. Bank accounts and credit cards with either a Michigan or California address. (Some accounts were very recently changed to CA), b. Personal Investments and Roth IRA with Vanguard (with some 2018 income from sale of securities)

Within the UK, I have: a. UK bank accounts, b. UK government pension

3 weeks ago, I moved some US bank accounts' addresses from Michigan to California. I filled out a California Real-ID driver's license renewal form and also re-registered to vote (in CA). Finally, I filed a USPS change of address form (listing California addresses as both the "to" and "from").

My questions are as follows:

CALIFORNIA STATE
1) Do I really need to file CA state taxes if I don't live in California? I'm starting to suspect that this might be the case, but is it necessary to do so if my income didn't exceed the 2017 federal foreign income exclusion threshold? What about this year, when I have income above the foreign income exclusion and do owe federal taxes? What is safe harbor?

2) Before realising this might not have been the best idea, I was planning on renewing and upgrading my CA driver's license, and thus arranged the necessary components (letter from a bank with the new CA address, USPS mail confirmation of change of address, letter from SF elections, etc.) to show my CA residency and thus renew/upgrade my soon-to-expire driver's license to a new, California-issued Real-ID.
Is there any reason I should not go ahead and get that license? If I really should be severing ties with CA (which I understand might be a recommendation), is it not too late to go back if I've already changed a bank address, a USPS change of address, and started the online application for drivers license and voting (which would be confirmed when I visit the DMV for the license)?

3) What are the next steps if a) for taxes, b) if I do go ahead and renew the CA license and c) if I should not renew the CA license?

FEDERAL TAXES
4) How does one use form F1116, Foreign Tax Credit? If I earned ~$130,000 in the UK, on which I paid UK taxes, and I was able to take ~$100,000 off as foreign income exclusion, how do I treat the remaining $30K? Can I claim back the UK taxes that I paid somehow?

Thank you so much.

Eno Deb
Posts: 85
Joined: Sun Feb 03, 2019 4:08 pm

Re: URGENT! Expat taxes: California state taxes, driver's license renewal, foreign tax credit,

Post by Eno Deb » Thu Apr 04, 2019 10:17 am

Take a look at this:

https://www.greenbacktaxservices.com/bl ... ate-taxes/

As things currently stand, CA would probably consider you a resident. You should probably not renew your CA license and not register to vote there. You may also want to make your expat status "official" by telling your financial institutions that you now reside at a foreign address. However, be warned that you'll probably have to move your Vanguard investment accounts elsewhere since Vanguard is not expat-friendly. The regular bank accounts and credit cards should not be a problem (I have lived abroad for >8 years while having Wells Fargo account with the bank knowing about it without issues).

quantAndHold
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Re: URGENT! Expat taxes: California state taxes, driver's license renewal, foreign tax credit,

Post by quantAndHold » Thu Apr 04, 2019 10:23 am

My understanding, and I’m sure someone will correct me...

When you leave the country, you’re still a resident of the last state you last lived in. If that’s California, then you will owe California taxes.

I’ve seen recommendations to establish residency in a no income tax state before you leave. As I understand, there’s a way to establish yourself as a nonresident for tax purposes, but I don’t know how to do that. I don’t know much about being an expat, but full time RVers typically establish residency in either South Dakota, Florida, or Texas, because of the income tax situation, and the ease of establishing residency in those places.

I’m pretty sure getting a new California drivers license is not the way to get out of California taxes. I believe every state has real ID licenses now, so maybe establish residency in a different state and get one there.

Eno Deb
Posts: 85
Joined: Sun Feb 03, 2019 4:08 pm

Re: URGENT! Expat taxes: California state taxes, driver's license renewal, foreign tax credit,

Post by Eno Deb » Thu Apr 04, 2019 10:37 am

quantAndHold wrote:
Thu Apr 04, 2019 10:23 am
When you leave the country, you’re still a resident of the last state you last lived in. If that’s California, then you will owe California taxes.

I’ve seen recommendations to establish residency in a no income tax state before you leave. As I understand, there’s a way to establish yourself as a nonresident for tax purposes, but I don’t know how to do that. I don’t know much about being an expat, but full time RVers typically establish residency in either South Dakota, Florida, or Texas, because of the income tax situation, and the ease of establishing residency in those places.
Generally speaking, as an expat you are not considered a CA resident and do not have to pay CA state taxes. However, the franchise tax board may ask you to prove that you actually are an expat, which would be difficult if you are trying to "fly under the radar" by giving your banks a US address without actually living there, registering to vote etc. In my opinion it's best to play with open cards and make your expat status official, even though it may initially cause some hassles.

typical.investor
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Joined: Mon Jun 11, 2018 3:17 am

Re: URGENT! Expat taxes: California state taxes, driver's license renewal, foreign tax credit,

Post by typical.investor » Thu Apr 04, 2019 11:19 am

USinUK wrote:
Thu Apr 04, 2019 4:29 am
FEDERAL TAXES
4) How does one use form F1116, Foreign Tax Credit? If I earned ~$130,000 in the UK, on which I paid UK taxes, and I was able to take ~$100,000 off as foreign income exclusion, how do I treat the remaining $30K? Can I claim back the UK taxes that I paid somehow?

Thank you so much.
Yes, you can claim a credit for foreign taxes on the remaining $30k.

Do you want to do that though?

Other options include taking a housing deduction. It lowers the $100k you can exclude via the FEIE, but more than makes up for it. There is a limit by location. I've cleared $30k that way.

Another option, and I don't know how this works with UK taxes, but you could contribute to an IRA with the $30k. Be careful though because ROTH income limits are in effect and your UK income counts towards the limits.

Between the housing deduction and tIRA contribution, perhaps there isn't anything to claim a credit.

It depends on UK taxes if US tax sheltered accounts make sense. If the UK taxes them, I don't see the point.

TurboTax is helpful because it gets a little complicated. Your standard deduction will get applied to foreign income once you start claiming a credit.

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Nate79
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Location: Delaware

Re: URGENT! Expat taxes: California state taxes, driver's license renewal, foreign tax credit,

Post by Nate79 » Thu Apr 04, 2019 11:50 am

There are multiple threads on the topic of CA being extremely aggressive on this topic. If you have even a single small link to CA you can expect them to come after you for taxes.

Topic Author
USinUK
Posts: 13
Joined: Wed Apr 03, 2019 7:16 pm

Re: URGENT! Expat taxes: California state taxes, driver's license renewal, foreign tax credit,

Post by USinUK » Fri Apr 05, 2019 2:22 am

Eno Deb wrote:
Thu Apr 04, 2019 10:17 am
Take a look at this:

https://www.greenbacktaxservices.com/bl ... ate-taxes/

As things currently stand, CA would probably consider you a resident. You should probably not renew your CA license and not register to vote there. You may also want to make your expat status "official" by telling your financial institutions that you now reside at a foreign address. However, be warned that you'll probably have to move your Vanguard investment accounts elsewhere since Vanguard is not expat-friendly. The regular bank accounts and credit cards should not be a problem (I have lived abroad for >8 years while having Wells Fargo account with the bank knowing about it without issues).
Thank you - this is helpful. Regarding the license - if I already filled out the forms for the license and voting (though I haven't completed the process by going in person) and have (perhaps erroneously) already changed my address and bank account address to CA, is it not too late? And if it is too late, I wonder if I should just renew the drivers license then. Any thoughts? Can I even backtrack now?

Regarding voting, I am allowed to vote as a US citizen of course; but, to do that I have to register somewhere. How should that work if I need to avoid CA?

AlohaJoe
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Location: Saigon, Vietnam

Re: URGENT! Expat taxes: California state taxes, driver's license renewal, foreign tax credit,

Post by AlohaJoe » Fri Apr 05, 2019 2:31 am

typical.investor wrote:
Thu Apr 04, 2019 11:19 am
USinUK wrote:
Thu Apr 04, 2019 4:29 am
FEDERAL TAXES
4) How does one use form F1116, Foreign Tax Credit? If I earned ~$130,000 in the UK, on which I paid UK taxes, and I was able to take ~$100,000 off as foreign income exclusion, how do I treat the remaining $30K? Can I claim back the UK taxes that I paid somehow?

Thank you so much.
Yes, you can claim a credit for foreign taxes on the remaining $30k.
You can't claim both FEIE and foreign tax credit. You have to pick one or the other. Claiming FEIE is simpler but unless you live in a tax haven like Dubai or Singapore, you'll almost always come out ahead by taking the foreigner tax credit since taxes in the US are so low.

Basically, you need to do it both ways and see which one is better for you. Then pick. Once you pick, you can't change it for five years, so you can't switch back and forth constantly.

typical.investor
Posts: 977
Joined: Mon Jun 11, 2018 3:17 am

Re: URGENT! Expat taxes: California state taxes, driver's license renewal, foreign tax credit,

Post by typical.investor » Fri Apr 05, 2019 2:35 am

AlohaJoe wrote:
Fri Apr 05, 2019 2:31 am
typical.investor wrote:
Thu Apr 04, 2019 11:19 am
USinUK wrote:
Thu Apr 04, 2019 4:29 am
FEDERAL TAXES
4) How does one use form F1116, Foreign Tax Credit? If I earned ~$130,000 in the UK, on which I paid UK taxes, and I was able to take ~$100,000 off as foreign income exclusion, how do I treat the remaining $30K? Can I claim back the UK taxes that I paid somehow?

Thank you so much.
Yes, you can claim a credit for foreign taxes on the remaining $30k.
You can't claim both FEIE and foreign tax credit. You have to pick one or the other.
You can't claim both on the same income. Amounts that exceed the FEIE are US taxable -- you are not claiming both on the same income.

So yes, you can and should claim make a claim for foreign taxes paid on income that is also US taxable.

Just because you use the FEIE, it doesn't mean you can't claim a credit for taxes paid to foreign governments on holdings in an ETF does it? Claim a credit on anything double taxed.
AlohaJoe wrote:
Fri Apr 05, 2019 2:31 am
Claiming FEIE is simpler but unless you live in a tax haven like Dubai or Singapore, you'll almost always come out ahead by taking the foreigner tax credit since taxes in the US are so low.

Basically, you need to do it both ways and see which one is better for you. Then pick. Once you pick, you can't change it for five years, so you can't switch back and forth constantly.
That's true and I wish it weren't so. People overseas don't move or what is the reason I wonder.

Topic Author
USinUK
Posts: 13
Joined: Wed Apr 03, 2019 7:16 pm

Re: URGENT! Expat taxes: California state taxes, driver's license renewal, foreign tax credit,

Post by USinUK » Fri Apr 05, 2019 2:42 am

typical.investor wrote:
Fri Apr 05, 2019 2:35 am
AlohaJoe wrote:
Fri Apr 05, 2019 2:31 am
typical.investor wrote:
Thu Apr 04, 2019 11:19 am
USinUK wrote:
Thu Apr 04, 2019 4:29 am
FEDERAL TAXES
4) How does one use form F1116, Foreign Tax Credit? If I earned ~$130,000 in the UK, on which I paid UK taxes, and I was able to take ~$100,000 off as foreign income exclusion, how do I treat the remaining $30K? Can I claim back the UK taxes that I paid somehow?

Thank you so much.
Yes, you can claim a credit for foreign taxes on the remaining $30k.
You can't claim both FEIE and foreign tax credit. You have to pick one or the other.
You can't claim both on the same income. Amounts that exceed the FEIE, are US taxable. Thus, you are not claiming both.

So yes, you can and should claim make a claim for foreign taxes paid on income that is also US taxable.

Just because you use the FEIE, it doesn't mean you can't claim a credit for taxes paid to foreign governments on holdings in an ETF does it? Claim a credit on anything double taxed.
AlohaJoe wrote:
Fri Apr 05, 2019 2:31 am
Claiming FEIE is simpler but unless you live in a tax haven like Dubai or Singapore, you'll almost always come out ahead by taking the foreigner tax credit since taxes in the US are so low.

Basically, you need to do it both ways and see which one is better for you. Then pick. Once you pick, you can't change it for five years, so you can't switch back and forth constantly.
That's true and it sucks.
Thanks all. Just to clarify, as I'm a bit confused:
If I made $130k and I can use FEIE to exclude $100 of that, then on the remaining $30k I CAN claim a foreign tax credit because that income is eligible to be double-taxed. How does this work with the need to choose one or the other?

typical.investor
Posts: 977
Joined: Mon Jun 11, 2018 3:17 am

Re: URGENT! Expat taxes: California state taxes, driver's license renewal, foreign tax credit,

Post by typical.investor » Fri Apr 05, 2019 2:51 am

USinUK wrote:
Fri Apr 05, 2019 2:42 am
typical.investor wrote:
Fri Apr 05, 2019 2:35 am
AlohaJoe wrote:
Fri Apr 05, 2019 2:31 am
typical.investor wrote:
Thu Apr 04, 2019 11:19 am
USinUK wrote:
Thu Apr 04, 2019 4:29 am
FEDERAL TAXES
4) How does one use form F1116, Foreign Tax Credit? If I earned ~$130,000 in the UK, on which I paid UK taxes, and I was able to take ~$100,000 off as foreign income exclusion, how do I treat the remaining $30K? Can I claim back the UK taxes that I paid somehow?

Thank you so much.
Yes, you can claim a credit for foreign taxes on the remaining $30k.
You can't claim both FEIE and foreign tax credit. You have to pick one or the other.
You can't claim both on the same income. Amounts that exceed the FEIE, are US taxable. Thus, you are not claiming both.

So yes, you can and should claim make a claim for foreign taxes paid on income that is also US taxable.

Just because you use the FEIE, it doesn't mean you can't claim a credit for taxes paid to foreign governments on holdings in an ETF does it? Claim a credit on anything double taxed.
AlohaJoe wrote:
Fri Apr 05, 2019 2:31 am
Claiming FEIE is simpler but unless you live in a tax haven like Dubai or Singapore, you'll almost always come out ahead by taking the foreigner tax credit since taxes in the US are so low.

Basically, you need to do it both ways and see which one is better for you. Then pick. Once you pick, you can't change it for five years, so you can't switch back and forth constantly.
That's true and it sucks.
Thanks all. Just to clarify, as I'm a bit confused:
If I made $130k and I can use FEIE to exclude $100 of that, then on the remaining $30k I CAN claim a foreign tax credit because that income is eligible to be double-taxed.
That is correct. The only thing the IRS ever complained about was when I figured my US taxes on the $30k wrong. I used the wrong bracket. Excluded income still pushes you up in brackets and you don't start paying on that $30k at the lowest rate. It was my first time.
USinUK wrote:
Fri Apr 05, 2019 2:42 am
How does this work with the need to choose one or the other?
If you had say $50k in income, you couldn't choose to exclude $45k under FEIE and then make a tIRA contribution with the remaining claiming that you didn't exclude that amount so it's taxable so you can use it for your IRA. If you choose the FEIE, you must exclude up to the limit.

But IRA contributions are possible after you exceed the FEIE. And so is claiming for double taxes.

Check out the housing exclusion too though. It's on the same form as the FEIE. Or maybe not -- there is a housing deduction too. I think the deduction is on self employment income. Maybe that applies to your situations and maybe it's beneficial. I qualified for the housing exclusion.
Last edited by typical.investor on Fri Apr 05, 2019 2:59 am, edited 1 time in total.

Topic Author
USinUK
Posts: 13
Joined: Wed Apr 03, 2019 7:16 pm

Re: URGENT! Expat taxes: California state taxes, driver's license renewal, foreign tax credit,

Post by USinUK » Fri Apr 05, 2019 2:52 am

typical.investor wrote:
Thu Apr 04, 2019 11:19 am
USinUK wrote:
Thu Apr 04, 2019 4:29 am
FEDERAL TAXES
4) How does one use form F1116, Foreign Tax Credit? If I earned ~$130,000 in the UK, on which I paid UK taxes, and I was able to take ~$100,000 off as foreign income exclusion, how do I treat the remaining $30K? Can I claim back the UK taxes that I paid somehow?
Yes, you can claim a credit for foreign taxes on the remaining $30k.

Do you want to do that though?

Other options include taking a housing deduction. It lowers the $100k you can exclude via the FEIE, but more than makes up for it. There is a limit by location. I've cleared $30k that way.

Another option, and I don't know how this works with UK taxes, but you could contribute to an IRA with the $30k. Be careful though because ROTH income limits are in effect and your UK income counts towards the limits.

Between the housing deduction and tIRA contribution, perhaps there isn't anything to claim a credit.

It depends on UK taxes if US tax sheltered accounts make sense. If the UK taxes them, I don't see the point.

TurboTax is helpful because it gets a little complicated. Your standard deduction will get applied to foreign income once you start claiming a credit.
Thank you again. So considering with the $30k above the FEIE, it sounds like I could either:
a) claim a foreign tax credit
b) take a housing deduction (I spent $18k on rent)
c) invest in an IRA - I only have a Roth IRA so n/a. On that note, I would really like to contribute to my Roth this year. How do I determine eligibility for it? I think my AGI is roughly $139k which might be above the threshold ($135k?) but I wonder if it is based on this number or based on my taxable income of $30-40k after the FEIE? Do you know?
Thanks for your help!

Topic Author
USinUK
Posts: 13
Joined: Wed Apr 03, 2019 7:16 pm

Re: URGENT! Expat taxes: California state taxes, driver's license renewal, foreign tax credit,

Post by USinUK » Fri Apr 05, 2019 3:00 am

typical.investor wrote:
Thu Apr 04, 2019 11:19 am
Yes, you can claim a credit for foreign taxes on the remaining $30k.

Do you want to do that though?

Other options include taking a housing deduction. It lowers the $100k you can exclude via the FEIE, but more than makes up for it. There is a limit by location. I've cleared $30k that way.

TurboTax is helpful because it gets a little complicated. Your standard deduction will get applied to foreign income once you start claiming a credit.
If I fill in the things on TurboTax, will it optimise the FEIE / housing exclusion / foreign tax credit for me?

typical.investor
Posts: 977
Joined: Mon Jun 11, 2018 3:17 am

Re: URGENT! Expat taxes: California state taxes, driver's license renewal, foreign tax credit,

Post by typical.investor » Fri Apr 05, 2019 3:04 am

USinUK wrote:
Fri Apr 05, 2019 2:52 am
typical.investor wrote:
Thu Apr 04, 2019 11:19 am
USinUK wrote:
Thu Apr 04, 2019 4:29 am
FEDERAL TAXES
4) How does one use form F1116, Foreign Tax Credit? If I earned ~$130,000 in the UK, on which I paid UK taxes, and I was able to take ~$100,000 off as foreign income exclusion, how do I treat the remaining $30K? Can I claim back the UK taxes that I paid somehow?
Yes, you can claim a credit for foreign taxes on the remaining $30k.

Do you want to do that though?

Other options include taking a housing deduction. It lowers the $100k you can exclude via the FEIE, but more than makes up for it. There is a limit by location. I've cleared $30k that way.

Another option, and I don't know how this works with UK taxes, but you could contribute to an IRA with the $30k. Be careful though because ROTH income limits are in effect and your UK income counts towards the limits.

Between the housing deduction and tIRA contribution, perhaps there isn't anything to claim a credit.

It depends on UK taxes if US tax sheltered accounts make sense. If the UK taxes them, I don't see the point.

TurboTax is helpful because it gets a little complicated. Your standard deduction will get applied to foreign income once you start claiming a credit.
Thank you again. So considering with the $30k above the FEIE, it sounds like I could either:
a) claim a foreign tax credit
b) take a housing deduction (I spent $18k on rent)
c) invest in an IRA - I only have a Roth IRA so n/a. On that note, I would really like to contribute to my Roth this year. How do I determine eligibility for it? I think my AGI is roughly $139k which might be above the threshold ($135k?) but I wonder if it is based on this number or based on my taxable income of $30-40k after the FEIE? Do you know?
Thanks for your help!
For a ROTH, you are over. Your excluded income pushes you up. Maybe you can do a backdoor conversion. (ie non-deductable tIRA contribution and then conversion to the ROTH). I just did a conversion from tIRA to ROTH and had to have 10% withheld as an expat. So that 10% is an early withdrawal I think and will face a 10% penalty perhaps. So 1% loss? First time, I dk.

Here is the housing stuff.

https://www.irs.gov/individuals/interna ... -deduction

typical.investor
Posts: 977
Joined: Mon Jun 11, 2018 3:17 am

Re: URGENT! Expat taxes: California state taxes, driver's license renewal, foreign tax credit,

Post by typical.investor » Fri Apr 05, 2019 3:05 am

USinUK wrote:
Fri Apr 05, 2019 3:00 am
typical.investor wrote:
Thu Apr 04, 2019 11:19 am
Yes, you can claim a credit for foreign taxes on the remaining $30k.

Do you want to do that though?

Other options include taking a housing deduction. It lowers the $100k you can exclude via the FEIE, but more than makes up for it. There is a limit by location. I've cleared $30k that way.

TurboTax is helpful because it gets a little complicated. Your standard deduction will get applied to foreign income once you start claiming a credit.
If I fill in the things on TurboTax, will it optimise the FEIE / housing exclusion / foreign tax credit for me?
No, fill it in one way. Save and try it another way. Then compare. Nice dream though. Why don't you go into software development and work at TurboTax. Sound like you'd be good at it.

typical.investor
Posts: 977
Joined: Mon Jun 11, 2018 3:17 am

Re: URGENT! Expat taxes: California state taxes, driver's license renewal, foreign tax credit,

Post by typical.investor » Fri Apr 05, 2019 3:10 am

USinUK wrote:
Fri Apr 05, 2019 2:52 am
c) invest in an IRA - I only have a Roth IRA so n/a. On that note, I would really like to contribute to my Roth this year. How do I determine eligibility for it? I think my AGI is roughly $139k which might be above the threshold ($135k?) but I wonder if it is based on this number or based on my taxable income of $30-40k after the FEIE? Do you know?
Thanks for your help!
You know what? Try it with TurboTax. It does calculate eligibility.

With your standard deduction of $12.2k maybe you'd be under.

Topic Author
USinUK
Posts: 13
Joined: Wed Apr 03, 2019 7:16 pm

Re: URGENT! Expat taxes: California state taxes, driver's license renewal, foreign tax credit,

Post by USinUK » Fri Apr 05, 2019 3:11 am

typical.investor wrote:
Fri Apr 05, 2019 3:05 am

If I fill in the things on TurboTax, will it optimise the FEIE / housing exclusion / foreign tax credit for me?
No, fill it in one way. Save and try it another way. Then compare. Nice dream though. Why don't you go into software development and work at TurboTax. Sound like you'd be good at it.
[/quote]

LOL. Luckily I get to work on environmental sustainability and climate change; way more interesting. ;)

Topic Author
USinUK
Posts: 13
Joined: Wed Apr 03, 2019 7:16 pm

Re: URGENT! Expat taxes: California state taxes, driver's license renewal, foreign tax credit,

Post by USinUK » Fri Apr 05, 2019 3:15 am

typical.investor wrote:
Fri Apr 05, 2019 3:10 am

You know what? Try it with TurboTax. It does calculate eligibility.
It does? Where?

typical.investor
Posts: 977
Joined: Mon Jun 11, 2018 3:17 am

Re: URGENT! Expat taxes: California state taxes, driver's license renewal, foreign tax credit,

Post by typical.investor » Fri Apr 05, 2019 3:24 am

USinUK wrote:
Fri Apr 05, 2019 3:15 am
typical.investor wrote:
Fri Apr 05, 2019 3:10 am

You know what? Try it with TurboTax. It does calculate eligibility.
It does? Where?
Aaah well it tells you if you have to pay a penalty. The software is out before the April 15th contribution deadline (for the previous year).

nalor511
Posts: 382
Joined: Mon Jul 27, 2015 1:00 am

Re: URGENT! Expat taxes: California state taxes, driver's license renewal, foreign tax credit,

Post by nalor511 » Fri Apr 05, 2019 3:38 am

typical.investor wrote:
Fri Apr 05, 2019 3:04 am
USinUK wrote:
Fri Apr 05, 2019 2:52 am
typical.investor wrote:
Thu Apr 04, 2019 11:19 am
USinUK wrote:
Thu Apr 04, 2019 4:29 am
FEDERAL TAXES
4) How does one use form F1116, Foreign Tax Credit? If I earned ~$130,000 in the UK, on which I paid UK taxes, and I was able to take ~$100,000 off as foreign income exclusion, how do I treat the remaining $30K? Can I claim back the UK taxes that I paid somehow?
Yes, you can claim a credit for foreign taxes on the remaining $30k.

Do you want to do that though?

Other options include taking a housing deduction. It lowers the $100k you can exclude via the FEIE, but more than makes up for it. There is a limit by location. I've cleared $30k that way.

Another option, and I don't know how this works with UK taxes, but you could contribute to an IRA with the $30k. Be careful though because ROTH income limits are in effect and your UK income counts towards the limits.

Between the housing deduction and tIRA contribution, perhaps there isn't anything to claim a credit.

It depends on UK taxes if US tax sheltered accounts make sense. If the UK taxes them, I don't see the point.

TurboTax is helpful because it gets a little complicated. Your standard deduction will get applied to foreign income once you start claiming a credit.
Thank you again. So considering with the $30k above the FEIE, it sounds like I could either:
a) claim a foreign tax credit
b) take a housing deduction (I spent $18k on rent)
c) invest in an IRA - I only have a Roth IRA so n/a. On that note, I would really like to contribute to my Roth this year. How do I determine eligibility for it? I think my AGI is roughly $139k which might be above the threshold ($135k?) but I wonder if it is based on this number or based on my taxable income of $30-40k after the FEIE? Do you know?
Thanks for your help!
For a ROTH, you are over. Your excluded income pushes you up. Maybe you can do a backdoor conversion. (ie non-deductable tIRA contribution and then conversion to the ROTH). I just did a conversion from tIRA to ROTH and had to have 10% withheld as an expat. So that 10% is an early withdrawal I think and will face a 10% penalty perhaps. So 1% loss? First time, I dk.

Here is the housing stuff.

https://www.irs.gov/individuals/interna ... -deduction
I think you can recontribute the 10% withheld if you do it quickly, not sure on the timeframe, but memory says 60 days?

typical.investor
Posts: 977
Joined: Mon Jun 11, 2018 3:17 am

Re: URGENT! Expat taxes: California state taxes, driver's license renewal, foreign tax credit,

Post by typical.investor » Fri Apr 05, 2019 3:44 am

nalor511 wrote:
Fri Apr 05, 2019 3:38 am

I think you can recontribute the 10% withheld if you do it quickly, not sure on the timeframe, but memory says 60 days?
Seriously? Thanks I will look into it. I asked earlier. Where were you then. j/k. Thanks!

Topic Author
USinUK
Posts: 13
Joined: Wed Apr 03, 2019 7:16 pm

California state taxes for US expat renewing CA license

Post by USinUK » Fri Apr 05, 2019 3:51 am

[Thread merged into here, see below. --admin LadyGeek]

I live and work in the United Kingdom indefinitely. My CA driver's license is set to expire, so I thought I would renew it. However, I now understand that the tax implications might be bad.

A few weeks ago, I changed some bank addresses to CA (from Michigan), changed my official USPS mailing address to CA (from another location in CA), and filled out online the California Real-ID driver's license renewal form + re-registered to vote (in CA). I have not yet visited the DMV to finalise in person the driver's license and voting update that I did online, but was going to go tomorrow.

If I already filled out the forms for the license and voting (though I haven't completed the process by going in person) and have (perhaps erroneously) already changed my mailing and bank account addresses to CA, is it not too late to avoid CA trying to tax me on everything? And if it is too late, I wonder if I should just renew the drivers license so that I still have one. Thoughts? Is it futile to backtrack now?

Also, as a US citizen I am allowed to vote of course; but, to do that I have to register somewhere. How should that work if I need to avoid looking like a California resident so I don't get taxed by the state?

Thanks for your helpl!

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Re: California state taxes for US expat renewing CA license

Post by AlohaJoe » Fri Apr 05, 2019 4:16 am

USinUK wrote:
Fri Apr 05, 2019 3:51 am
If I already filled out the forms for the license and voting (though I haven't completed the process by going in person) and have (perhaps erroneously) already changed my mailing and bank account addresses to CA, is it not too late to avoid CA trying to tax me on everything?
My guess is that it is too late since it isn't like you only made one small change. I also guess that if you tried to not file in CA they will come after you, since they are known for that. And my third guess is that you could probably successfully defend yourself, though you may need to hire a lawyer to do that.
And if it is too late, I wonder if I should just renew the drivers license so that I still have one.
If you live in the UK, get a UK driver's license. I don't understand why you haven't. Let your US driver's license lapse. That's what I did and it seems like the obvious course of action. Am I missing something?
Also, as a US citizen I am allowed to vote of course; but, to do that I have to register somewhere.
You don't get to vote in state elections, only federal elections. You vote in the last state you lived in prior to moving. They all have ways to deal with military/absentee ballots, so it isn't anything special. Hence, I vote in Colorado, though it has been nearly two decades since I lived there. I get an email from the Department of Whatever every 4 years telling me to print out my ballot and where to mail it.

I don't understand why you would have registered to vote in California. You were already registered to vote in Michigan, weren't you?

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Re: California state taxes for US expat renewing CA license

Post by Valuethinker » Fri Apr 05, 2019 5:18 am

USinUK wrote:
Fri Apr 05, 2019 3:51 am
I live and work in the United Kingdom indefinitely. My CA driver's license is set to expire, so I thought I would renew it. However, I now understand that the tax implications might be bad.

A few weeks ago, I changed some bank addresses to CA (from Michigan), changed my official USPS mailing address to CA (from another location in CA), and filled out online the California Real-ID driver's license renewal form + re-registered to vote (in CA). I have not yet visited the DMV to finalise in person the driver's license and voting update that I did online, but was going to go tomorrow.

If I already filled out the forms for the license and voting (though I haven't completed the process by going in person) and have (perhaps erroneously) already changed my mailing and bank account addresses to CA, is it not too late to avoid CA trying to tax me on everything? And if it is too late, I wonder if I should just renew the drivers license so that I still have one. Thoughts? Is it futile to backtrack now?
Check the UK rules for drivers license very carefully. The UK has the hardest drivers license test in the world (that I have heard of). It's quite common to fail 2-3 times*. Thus requalifying in the UK is an almighty pain and I have heard of Americans going to France, doing a residential driving course and passing there and using EU rules to then drive in the UK. That door will of course be shortly closed ;-), or not, depending on what mood Parliament is in on the day ;-).

Also, as a US citizen I am allowed to vote of course; but, to do that I have to register somewhere. How should that work if I need to avoid looking like a California resident so I don't get taxed by the state?

Thanks for your helpl!
If you are into electoral college mechanics, a vote in Michigan is worth N times a vote in California, where N is a number pretty close to infinity... Congressional and state of course it's different (maybe).

* It's almost as if there is a rule against passing someone the first time. That would not surprise me.

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Re: California state taxes for US expat renewing CA license

Post by JoMoney » Fri Apr 05, 2019 6:20 am

Sorry, didn't have time to read all that was posted only briefly scanned.

Be aware of California's Non-Resident Safe Harbor, if you are tax "domiciled" in California (even though no longer a resident) and you do not expect to live in California for at least 546 days (roughly >year and a half) and you don't have income derived in California, then you will likely file taxes as a "California Non-Resident" and not have any taxes owed
https://blog.nolo.com/taxes/2012/07/26/ ... fe-harbor/

Trying to establish residency in a state you never lived in and have no intention of living in, only for tax purposes, is a big no-no that can have big repercussions.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: URGENT! Expat taxes: California state taxes, driver's license renewal, foreign tax credit,

Post by Eno Deb » Fri Apr 05, 2019 9:51 am

USinUK wrote:
Fri Apr 05, 2019 2:22 am
Thank you - this is helpful. Regarding the license - if I already filled out the forms for the license and voting (though I haven't completed the process by going in person) and have (perhaps erroneously) already changed my address and bank account address to CA, is it not too late?
Why would it be too late? Just cancel the DMV appointment, and change your address at the financial institutions again (but first talk to them about possible consequences, especially on any brokerage accounts you may have).
And if it is too late, I wonder if I should just renew the drivers license then. Any thoughts? Can I even backtrack now?
Why are you trying to renew your license in the first place? As an expat, you can use your UK license to drive in the US if that's the concern.
Regarding voting, I am allowed to vote as a US citizen of course; but, to do that I have to register somewhere. How should that work if I need to avoid CA?
Normally you request an absentee ballot from wherever you were last registered to vote before moving abroad.

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Re: URGENT! Expat taxes: California state taxes, driver's license renewal, foreign tax credit,

Post by LadyGeek » Fri Apr 05, 2019 10:34 am

In order to give appropriate advice, it's best to keep all the information in one spot. I merged USinUK's thread into the on-going discussion.

We do have a Non-US Investing forum, but the expertise to answer these questions needs our CA state experts.

Note that the Non-US investing forum is better focused for questions related to ex-pat investing and personal finance. Questions on foreign tax credit (as a UK ex-pat) should be asked in that forum.
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Re: URGENT! Expat taxes: California state taxes, driver's license renewal, foreign tax credit,

Post by mmegu » Fri Apr 05, 2019 10:42 am

I lived as an US expat in Asia for close to 30 years. Here's my 2 cents.

1. You must completely extricate yourself from California (Or, any other high tax state). Do not have a drivers license there. Do not have your California address listed on any type of financial account. Do not register to vote there. Do not have your California address listed on your federal tax forms.

You need to set up an address in a state that does not have a state tax. You could use a friend's address. Rent a very cheap flop house apartment or even buy some type on uni-bomber cabin deep in the woods. Just get your address established in this non tax state. Just make sure to have all financial related mail electronically sent to you.

2. Be very careful about telling your broker that you're now living overseas. Many will tell you to move the account or they will substantially curtail their services to you. You will likely have many times in the future where you're going to need those services. If you have any legal address in the US, they will be fine with that.

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Re: URGENT! Expat taxes: California state taxes, driver's license renewal, foreign tax credit,

Post by LadyGeek » Mon Jul 15, 2019 6:03 pm

FYI - The OP is asking portfolio questions here: US expat transferring assets to UK - financial and tax advice urgently needed, which is in the non-US investing forum.
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Re: California state taxes for US expat renewing CA license

Post by AKsuited » Mon Jul 15, 2019 7:26 pm

JoMoney wrote:
Fri Apr 05, 2019 6:20 am
Sorry, didn't have time to read all that was posted only briefly scanned.

Be aware of California's Non-Resident Safe Harbor, if you are tax "domiciled" in California (even though no longer a resident) and you do not expect to live in California for at least 546 days (roughly >year and a half) and you don't have income derived in California, then you will likely file taxes as a "California Non-Resident" and not have any taxes owed
https://blog.nolo.com/taxes/2012/07/26/ ... fe-harbor/

Trying to establish residency in a state you never lived in and have no intention of living in, only for tax purposes, is a big no-no that can have big repercussions.
This. I'm an expat and still have ties to CA; my home address is still there and I have a rental. I file Non-Resident Safe Harbor and it's never been an issue. It's also quick and can be done via turbo tax

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