Letter Re: Advice on Moving Offshore

J. Rawles:
My wife and I have the chance to buy a farm in the Toledo [southern] district of Belize. With our savings, and [with] what we net out of selling [our house] in San Diego, I can afford to pay cash for it. I really feel the need to “Get Outta Dodge”. The farm has two springs and a creek. I’m self-employed. I write software, freelance, mostly for my former employer. I earn around $80K per year. That [much income] is considered a fortune [in Belize.] I speak decent Spanish, and my wife is fully fluent [in Spanish]. (She has relatives in Belize–and one, her uncle, will be our next-door neighbor!) So, if I do “go ex-pat”, what are the tax implications? Thanking You in Advance, – Pete in San Diego

JWR Replies: The first $91,400 per year that you earn (or $182,800 for a husband and wife, filing a joint return) overseas is exempt from US Federal income tax (“foreign earned income”). But this is only if you meet a few conditions–most notably that the portion of your income that is exempt can’t be interest income or royalty income, and that you spend less than 30 days each year visiting the United States. (You must be a qualified “foreign resident.”) For details, see the IRS web page links on the Foreign Earned Income Exclusion (FEIE) page and the instructions for IRS Form 2555. May God bless you and your family, in your upcoming move!