Advice on making the move from New York to the Philippines

[Tommy T.]

1 minute ago, Heeb said:

I assumed he was talking about paying no U.S. taxes

Good point.... thanks for pointing that out. I forgot about U.S. taxes.

[hk blues]

4 hours ago, Heeb said:

How are your capital gains tax free?

My question too - I though American citizens were taxed on global income?  Might be able to swing it with taxes here in the Philippines but US taxes...not sure about that.  

[Joey G]

Day trading is best served with a fast and super reliable internet connection. Literally seconds of delay can swing a gain to a loss, or missed opportunity. Yes, it's possible to do day trading here, but it will depend on how time sensitive your trades are.  In general, the connections here won't be what you are used to.

Good idea on trying this for a year (minimum). I'd also have a minimum of one year of living expenses + a ticket out in the bank as a safety net before coming over as well. 

 

 

[Gator]

51 minutes ago, hk blues said:

My question too - I though American citizens were taxed on global income?  Might be able to swing it with taxes here in the Philippines but US taxes...not sure about that.  

There is a “Foreign Earned Income Tax Exclusion” that covers global income for expats.  I think it’s now just over 105k USD per calendar year. Essentially any earned income under that amount is not subject to US income taxes and you still have to file a return. Same applies to state taxes, but that gets complicated and to be safe I would consider moving my tax home a state tax free state like Florida or Nevada. 
 

The OP would be well under the threshold, but there are other restrictions such as the time allowed to be in the USA (for visits). The OP would do well to investigate the IRS’s rules or he could be in for an unwelcome surprise when, or if, he returns to the USA. 

Edited April 9, 2020 by Gator

[Heeb]

12 minutes ago, Gator said:

There is a “Foreign Earned Income Tax Exclusion” that covers global income for expats.  I think it’s now just over 105k USD per calendar year. Essentially any earned income under that amount is not subject to US income taxes and you still have to file a return. Same applies to state taxes, but that gets complicated and to be safe I would consider moving my tax home a state tax free state like Florida or Nevada. 
 

The OP would be well under the threshold, but there are other restrictions such as the time allowed to be in the USA (for visits). The OP would do well to investigate the IRS’s rules or he could be in for an unwelcome surprise when, or if, he returns to the USA. 

Would day trading be considered foreign income?

[Gator]

6 minutes ago, Heeb said:

Would day trading be considered foreign income?

The short answer, yes. “Earned Income” as defined by US tax law covers a broad spectrum of income including, but obviously not limited to, capital gains earned via day trading; regardless of your location or the location of market where you trade.
 

I used to trade Forex on various international platforms - one in Austria. Even they required my TIN (taxpayers identification number) when I set up my account (although they never sent me any tax related forms and as far as I can tell they never reported it to the IRS. I think they only asked to cover their asses with regard to money laundering laws). 

[Heeb]

41 minutes ago, Gator said:

The short answer, yes. “Earned Income” as defined by US tax law covers a broad spectrum of income including, but obviously not limited to, capital gains earned via day trading; regardless of your location or the location of market where you trade.
 

I used to trade Forex on various international platforms - one in Austria. Even they required my TIN (taxpayers identification number) when I set up my account (although they never sent me any tax related forms and as far as I can tell they never reported it to the IRS. I think they only asked to cover their asses with regard to money laundering laws). 

It probably depends on the platform and where he opened the account

 

[Heeb]

One problem is that your not paying into social security, many goose eggs for yearly income will hurt but if the OP isn't concerned no biggie

 

[OnMyWay]

My first question was also how does he not pay taxes on day trades?  Unless he is a high volume trader who can set it up as a full time business, (TTS) he will pay short term capital gains on day trade profits.  Someone who is in that class should be making a lot more than $500 a week  And as a TTS, apparently there is a huge amount of paperwork and you still pay taxes.

If he just started this, he may think he is tax free, but he is not.  You need a broker to trade and a broker reports to the IRS.

5 hours ago, Gator said:

The short answer, yes. “Earned Income” as defined by US tax law covers a broad spectrum of income including, but obviously not limited to, capital gains earned via day trading; regardless of your location or the location of market where you trade.

Got a link?  I don't think this is accurate.  Earned Income is money you are paid unless you are a farmer.

 

6 hours ago, Gator said:

There is a “Foreign Earned Income Tax Exclusion” that covers global income for expats.  I think it’s now just over 105k USD per calendar year. Essentially any earned income under that amount is not subject to US income taxes and you still have to file a return.

Foreign Earned Income Tax Exclusion applies when you are working (earned income) and paying taxes in the country where you earned it.  You may not have to pay U.S. taxes but you will pay income taxes where you earned.  That will be part of your tax return and it all gets very complicated.  That is why most companies who move an employee overseas provide tax services as part of the contract.

[Gator]

5 hours ago, OnMyWay said:

My first question was also how does he not pay taxes on day trades?  Unless he is a high volume trader who can set it up as a full time business, (TTS) he will pay short term capital gains on day trade profits.  Someone who is in that class should be making a lot more than $500 a week  And as a TTS, apparently there is a huge amount of paperwork and you still pay taxes.

If he just started this, he may think he is tax free, but he is not.  You need a broker to trade and a broker reports to the IRS.

Not all brokers report to the IRS. When I traded Forex, one of the US based brokers I used was OOANDA; they do not report to the IRS, but I did declare my gains on my taxes. If audited (which I was two years later, but for other reasons) the IRS would catch you when they review your bank records and see the deposits made from them. Maybe there are ways around that, but that’s for people far smarter then me and besides, I felt no reason to cheat and exclude it. 

 

5 hours ago, OnMyWay said:

Got a link?  I don't think this is accurate.  Earned Income is money you are paid unless you are a farmer.

You are correct, Capital Gains is taxed differently from earned income - no payroll tax (social security and Medicaid/Medicare). But it is still part of your AGI (Adjusted Gross Income) and you’re taxed accordingly. I was thinking of when I was in living and working in Germany and Switzerland as it pertained to Capital Investment and how it relates to services performed in respect to a sole proprietorship (I was working as sub-contractor to a company which had contracts with the DOD, DOS and Justice Dept). 

 

Foreign Earned Income Tax Exclusion applies when you are working (earned income) and paying taxes in the country where you earned it.  You may not have to pay U.S. taxes but you will pay income taxes where you earned.  That will be part of your tax return and it all gets very complicated.  That is why most companies who move an employee overseas provide tax services as part of the contract.

The Exclusion applies for income earned while working and residing outside of the USA, there is no stipulation that you pay or paid taxes to another government. My pay was sent by a British firm thru German and Swiss banks to my accounts in Germany and the USA. I didn’t pay any taxes to any government, except for the last few years when my income exceeded to excluded amount. I then only paid taxes on the amount over the exclusion.

https://www.irs.gov/publications/p54#en_US_2019_publink100047397

Perhaps you’re thinking of the Foreign earned tax credit, which is to offset or completely eliminate the taxes you paid to a foreign gov from your US taxes. 

 

Back to OP - he might be thinking he has no tax liability because his broker doesn’t report to the IRS. That’s his business, but I would suggest he consult a tax professional before departing the USA as I can only speak of my own experiences from a few years ago and am certainly no expert on taxes; and I don’t think you are either.