Expat Tax Planning and Other Considerations for Retiring Abroad

Expat Tax Planning and Retiring Abroad

Maybe you’ve already been adventuring around the world or intend to when you finally retire – either way, there are so many reasons for making such a decision. Whether you’re headed somewhere sandy and warm or to a bustling city filled with culture, there are some expat tax planning considerations you’ll want to make ahead of time so you can retire and start your adventure free of stress.

Social Security Benefits

Fortunately, when you retire overseas, you’re generally able to receive your Social Security benefits while abroad. However, it will ultimately depend on your citizenship and residency status as well as the agreements in place between the US and your host country. This where a little research and expat tax planning can come into play.

  • US Citizen? You’re eligible for benefits if you paid into Social Security.
  • Non-US Citizen? Your Social Security payments will be eliminated after you’ve been away from the US for six calendar months, unless you live in a country with which the US has a Totalization Agreement. If you live in one of the 26 countries on Country List 3, you can receive your Social Security payments no matter how much time you spent outside the US.

If you retire to a place on Country List 2, you can receive the same payments you would in the US, unless you’re receiving payments as a dependent or survivor. If you fall into those categories, you will need to meet additional requirements like:

  • Residency in the US for at least 5 years
  • Being entitled to benefits due to a worker who died while in the US military
  • Being a citizen of a country with which the US has a Totalization Agreement

It’s important to note that if you live in or plan to live in Cuba or North Korea, the Social Security Administration is unable to send payments due to sanctions. However, if you’re a US citizen living in one of those countries, you can receive any withheld payments once you arrive in a country where the SSA will send payments.

Expat Tax Obligations

If you’re already living abroad, then filing US expat taxes may not come as a surprise to you. However, if you plan to move abroad upon retirement, don’t expect your US tax filing obligation to disappear! If you meet the filing thresholds for the tax year, you will need continue expat tax planning and report your worldwide income annually. The thresholds for the 2016 tax year are:

  • Single with income over $10,350
  • Married filing jointly with income over $20,700
  • Married filing separately with income over $4,050
  • Self-employed individual with net profit over $400

As a retiree, you can expect to be taxed on Social Security benefits (this depends on your provisional income), tax-deferred account withdrawals, profits from things like investment or real estate sales, pensions and annuities. It’s usually a good idea to consult with an expat tax pro, who can help you better understand your expat tax planning obligations once you retire abroad. Also, check out our guide for Americans retiring abroad for more tax tips and advice.

Foreign Financial Account Reporting

Last but not least – reporting your foreign financial accounts. Filing an FBAR and FATCA Form 8938 are necessary evils as part of the expat tax planning process if you meet the reporting thresholds.

FBAR: All US citizens with an excess of $10,000 in foreign bank accounts must file an FBAR each year. The deadline now follows the US tax deadline schedule, making the FBAR due June 15th for US expats (with an automatic extension until the October 16th deadline for 2017).

Form 8938: You’ll need to comply with FATCA requirements if your foreign financial accounts exceed the following thresholds (learn more about FATCA here):

  • Single or Married Filing Separately – The total value of your foreign assets is greater than $200,000 on the last day of the tax year or more than $300,000 at any point during the year.
  • Married Filing Jointly – The total value of your foreign assets owned by you and your spouse is greater than $400,000 on the last day of the tax year or more than $600,000 at any point during the year.

Form 8938 will accompany your US Tax Return, while the FBAR will be filed electronically with the US Treasury Department.

Retiring abroad brings with it the experience of a lifetime, and a chance to relax after having a successful career. Just remember to prepare for life as an expat ahead of time with expat tax planning, so you can kick off your new adventure carefree!

Have Questions About How Your Expat Taxes Are Affected By Retiring Abroad?

Our team of expat-expert CPAs and IRS Enrolled Agents have the expertise you’re looking for in a tax professional. Contact us today to have all of your burning questions answered, so you can get back to enjoying your adventure abroad!