Yeah, I guess a classic case might be Fargo, N.D. Maybe it’s cheaper to live and tele-work in Minnesota than the thriving metropolis of Fargo, lol.
My coworker kept his Texas driver’s license by using his mother’s address, but didn’t have to pay taxes, as far as I know (he would have mentioned it). He has since given up his U.S. citizenship.
I had read that California state taxes are still paid by ex-pats, if California was the last state of residence. That was years ago, so no idea if it’s still the same.
It used to be that someone had to provide a copy of a public utility bill to prove residency. A P.O. Box it not enough. No idea what the REAL ID rules are, but I believe they are even more strict.
In all of these discussions there’s a difference between what’s legal and what you can get away with because, at least so far, the computers aren’t checking too diligently.
So, for example, @Die_Capacitrix’s coworker was almost certainly violating the law by using his Mom’s address. But until somebody questions the arrangement he/she can get away with it for years.
But the OP’s underlying instinct is correct; there’s a real cottage industry out there catering to retired or itinerant people arbitraging the regs in various US states to get the best deal. And there are states such as SD (and FL) that are happy to be the bottom feeders in that arbitrage.
Just to note that my comment was wrong and @Die_Capacitrix is correct, I did not realize that there are a few states that do indeed keep coming after you to file a return even if you move abroad.
Texas has no income tax.
I assume this is because it’s legally a partnership, so all the partners by the definition of a partnership are personally doing business and earning money anywhere the company is. Not applicable to CEO’s of limited companies, I assume?
The rule in Canada for income tax (presumably same for most countries except USA) is that you do not pay taxes once you have no substantial connection to Canada. The company I worked for would pass this information on to workers transferred out of country. (But had a department to take care of taxes for them).Substantial connection meant things like still owning property here, having income, having other ties…
I assume this rule applies almost anywhere - the locale that you earned taxes has first dibs, then any other location-of-residence deducts that tax from their due.
So of course, any income earned in Canada is still taxed in Canada - first.Then those taxes paid can be deducted from, say, USA taxes up to amount that would be due in the USA. There’s a specific tax treaty between assorted countries, with slightly better terms such as allowing similar deductions in both locations (Canada, USA, and UK come to mind). So for example, in Canada there’s an additional deduction from taxable income ($10,000 or so) for those over 65. Because of the treaty, my dad was able to deduct that extra $10,000 from his Canadian pension as taxable income for US tax purposes living in the USA.
I hadn’t heard of that on the state level.
I do know a lot of military families around here have Florida plates on their cars, as there is no state income tax there (or wasn’t, last time I looked).
A couple decades ago, when I was on that long-term out of state project, a number of people on the project gave up their residences around here. One friend kept a place, and at least 3 of the people claimed that as their legal residence. I imagine they stayed there on the odd weekend, but most travelled back very rarely. We had a housing allowance for the other location - so they saved a BUNCH of money by not paying as much rent “at home” - I think they contributed something to the friend but nowhere near what they would have paid for a real place.
Not really legal - but who’s gonna check? I imagine if their Federal returns had gotten audited, someone might have done some digging, but it seemed highly unlikely.
Yeah, the US is a real bear. Interestingly, your EARNED income in other countries may be non-taxable.
Back in the 1990s, the firm I was with did a lot of business in Saudi Arabia and was always trying to recruit people to work there. I knew a number of people who did so - and financially, they made out like bandits: no rent at home, housing all paid for, and almost no income tax. I don’t think they had to pay any income tax to Saudi, either (Paul in Saudi might weigh in on that if he spots this).
This was back before the law was changed to make housing allowances for long-term travel taxable, I don’t know how THAT part is handled nowadays.
On foreign taxes paid: For a while, we had stock in a Brazilian company. Tax was always withheld from the dividends, paid to Brazil - and I got a full credit back for that tax. It wound up being about 5 bucks a year.
The amount paid by an employer for overseas was taxable even in the 90s, although a standard amount is deducted. I’ve never had housing provided for me so I don’t remember the exact amounts. The deduction is the same worldwide, so expats in high rent cities such as Tokyo are screwed.
My friend in Tokyo in the early 90s was over on an expat package from a Fortune 50 company, which provided housing with the same square footage and commuting distance as their New Jersey HQ, to the tune of $250 k a year.
They were taxed on this amount so the company had to help pay the taxes. That counted as income for tax purposes so the following year they needed more help from their company which made the next year more expensive. Ex pats there typically stayed there years, max.
Japanese income taxes are similar rates to the US and in addition to the tax exemption you get credit for foreign taxes paid so you don’t usually pay much it’s the ones in countries which don’t have income taxes that can wind up paying lots of US taxes.
I was offered a one-year contract to work in Saudi Arabia and would have lived in a dorm. I can see how that system could be gamed by a lower value for the free rent, and I can image that the ITR May be aware of that dodge.
I was not “up” on all the details of true overseas housing reimbursement taxability; I do know that colleagues who worked on projects in Saudia Arabia (late 1980s, VERY early 1990s) made out like bandits overall. That was, in any case, before the one law I’m familiar with, passed in 1992.
In 1992, a law was passed making long-term housing reimbursement taxable unless you followed strict rules, like being “home” for a month a year, and that home time had to be productive work, not just vacation. I was on a long-term project in NYC at the time, and by the time things were fully defined, it was several months into 1993. People were told “we’ll gross you up on the taxes for what we’ve paid so far this year - but if you want to stay on the project after that, you will be relocated to NYC”.
As I was in the process of rolling off and moving back home, I didn’t have to deal with that part. Because of the gross-up, that was the only year where my “income” exceed the Social Security limits.
I have no clue whether those who stayed got a bump in pay to handle the increased living expenses.
I would assume that someone doing work overseas, for which housing is provided, are as you said facing taxes on the housing allowances. Presumably between any gross-up the employer might do, and the portion of their earned income which is nontaxable, it’s still worthwhile. Paul in Saudi (Paul in Qatar now?) might weigh in on that.
In your specific situation: presumably you file a US tax return; is your wife’s income included? (assuming she earns; I don’t recall whether she works outside the home). And do you maintain “residence” in any US state?