The Tax and Financial Impact of Moving Abroad with Savannah Chaffin
Oct 30, 2024In the latest episode of "Keep What You Earn," Shannon dives deep into the complexities of expatriate life, focusing primarily on financial and tax implications. Joined by Savannah Chaffin, an expat tax expert based in Vienna, Austria, the discussion navigates the intricate world of moving abroad.
Savannah's journey began with a love for Europe, solidified by personal experiences, including meeting her partner in Munich. However, she soon realized that moving abroad carried significant financial responsibilities. She emphasizes the importance of researching target countries for lifestyle, cost of living, and job opportunities before making the move. Utilizing resources like Facebook groups, financial planners, or relocation experts can be invaluable.
A critical aspect discussed is the continuation of U.S. tax obligations due to citizenship-based taxation. This means that U.S. citizens must file U.S. tax returns and possibly pay U.S. taxes, even while living abroad. Savannah highlights nuances such as the foreign earned income exclusion, which allows expats to exclude a certain amount of earned income from U.S. taxation through either the bona fide residence test or the physical presence test.
Understanding your new home’s tax system is crucial. Savannah's surprise about Switzerland's wealth tax, which taxes global assets, underscores the need to be well-informed. Unlike the U.S. income tax system, wealth taxes may not qualify for foreign tax credits. Shannon stresses the necessity of resetting expectations and adapting to foreign tax systems, which may differ significantly from the U.S.
The episode also touches on the challenges of banking in foreign countries. Shannon shares her own experience with Costa Rican banks, which require thorough proof of the source of funds due to strict anti-money laundering regulations. For entrepreneurs and business owners, Savannah and Shannon discuss the importance of accurate reporting and being aware of foreign business deductions. Incorrectly assuming similarities between U.S. and foreign tax systems can lead to costly mistakes.
One practical takeaway is the importance of consolidating U.S. financial accounts before moving abroad. Ensuring that your financial institutions can manage your accounts while living overseas can save considerable hassle. Additionally, finding a local tax preparer familiar with both U.S. and local tax laws is invaluable for maintaining compliance.
Savannah advises those contemplating the expat life to prepare for challenges and be gritty. It's essential to ask questions and be ready for a bit of a "grind." She encourages making the move for personal fulfillment rather than solely for financial benefits, a sentiment echoed by Shannon.
"Keep What You Earn" provides a platform for enlightening discussions on the financial intricacies of expatriate life. Shannon Weinstein’s expertise, combined with Savannah Chaffin’s firsthand experiences, offers valuable insights for anyone considering or currently living abroad. Whether it’s understanding tax obligations, navigating local financial systems, or seeking resources, this episode equips listeners with the knowledge to make informed, strategic decisions about their expat journey. The journey is about more than just financial gains—it's about enhancing life’s richness through diverse experiences.
Savannah Chaffin is an Enrolled agent and self-declared "expat tax nerd", passionate about helping fellow expats navigate tax and finances when living abroad. She is the founder of Alveus Tax and co-founder of Passport to Wealth.
LinkedIn: https://www.linkedin.com/in/s-chaffin/
Website: https://www.passportwealth.com/
What you'll hear in this episode:
03:44 Decision to move made quickly and spontaneously.
06:46 Foreign income must be reported on US taxes.
12:28 Consolidate accounts and find a suitable bank.
14:30 Find familiar US tax preparer for complexity.
22:14 Switzerland taxes global wealth, not income.
25:11 Earned income exclusion: $126,500 in 2024 taxes.
26:39 Use physical presence test to adjust contributions.
31:02 Consider legalities: residency, taxes, visas abroad.
If you like this episode, check out:
Simple S Corp Salary Guide for Beginners
Why You Want to Avoid Tax Extensions
Moving to a Tax-Free State - Worth it?
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The information contained in this podcast is intended for educational purposes only and is not individual tax advice. Please consult a qualified professional before implementing anything you learn.
