Here it is folks, the post exactly 3 of you have been waiting for… our 2017 tax return. Just in time for the October 15th deadline.
It’s an interesting one this year; 2017 is the first time we claimed the Foreign Earned Income Exclusion (FEIE) which allowed us to once again have income in excess of $100,000 and pay $0 in income tax.
Details on the FEIE were difficult to come by, and examples either lacking or confusing, so this FEIE example is for posterity.
The Foreign Earned Income Exclusion is a great tax saving opportunity for Americans living abroad, allowing the exclusion of $104,100 in foreign earned income per person in 2018. Nice!
But… Of all the tax topics I’ve explored, the FEIE is among the most convoluted and obfuscated. For one thing, documentation uses words like convoluted and obfuscated. Worse, much of the information on the Internet is confusing or inaccurate.
It also isn’t necessarily obvious if a person should claim the FEIE, and doing so isn’t guaranteed to be advantageous.
In this post I attempt to explore the FEIE and when to use it, for ourselves and our posterity. (Well, ourselves at least… should we FEIE or nah?)
(GCC: People read everything I’ve written about Real Estate and automatically assume that I believe owning real estate in any form is a terrible idea. That is understandable, but is only mostly true :) When consciously entered as a real business and with a compatible personality, rental real estate can be a capital friendly, cash flow friendly, and tax friendly path to Financial Independence. In fact, this is the approach I recommended to my own brother. Today, Coach Carson enhances our Never Pay Taxes Again series, paying no taxes with rental properties.)
Jeremy set the bar high for early retirees. While most of us aim to minimize or optimize our taxes, he wrote an article that took it to another level entirely. His crazy idea was to Never Pay Taxes Again!
After reading Jeremy’s article, I began to look more closely at my own tax returns. I realized that most years I also paid little or no income taxes. And it turns out I used the same core principles Jeremy explained, except I did it with real estate investing.
So, this is my turn to show how to never pay taxes again (or at least keep them to a minimum). I’ll build on the core principles you’ve learned from Jeremy. Then I’ll explain the nuances that make real estate both beneficial and challenging.
This week I’m going into the GCC Inbox to answer a question I’ve received several times over the years.
GCC
Thanks to your blog my wife and I will be retiring early next year. We are Americans and want to move abroad for a few years, in part for the adventure but also to minimize our taxes in the early years. This should help with sequence of return risk. Most of our retirement income will come from qualified dividends and long term capital gains, same as you.
We like the idea of being in one place most of the time. Are there any countries you think would be good to use as a base?
Thank you.
Avid Reader
ABC World News Tonight
Our story was recently shared with 8 million viewers on ABC World News Tonight. Awesome!
Hopefully exposure to a huge audience of normal people will inspire a few to think about retirement in a different light. If you haven’t seen the video yet, here is the youtube clip (less than 2 minutes.)
