I’m a US citizen and I’ve been taking advantage of the FEIE, which allows me to pay no tax on the first $120k in income (an amount that changes every year) if I spend at least 330 days per year in other countries. This is the first thing to know about if you’re a US citizen nomad at any income level.
Since my income is more than the FEIE amount, I have recently been reducing my tax by contributing to a self-employed 401k and using the Foreign Housing Deduction to reduce my taxable income. I still had to pay self-employment tax but I got my effective tax rate down to around 10%.
However now that my income is increasing and my desire to pay taxes to a country I rarely visit is decreasing, I have a more sophisticated tax strategy. I have a Dubai Free Zone corporation, which pays me a salary equal to the FEIE so I pay no income tax. Any excess money flows into a C Corp in the US which I own. That corporate profit gets taxed at 10.5% since it owns no US entities, and I can take distributions for another 15% tax.
HOWEVER, instead of taking those taxable distributions, I can use that money in the C corp to make investments around the world, such as real estate. By using this new structure I expect to reduce my effective tax rate to under 5%.
I’m a US citizen and I’ve been taking advantage of the FEIE, which allows me to pay no tax on the first $120k in income (an amount that changes every year) if I spend at least 330 days per year in other countries. This is the first thing to know about if you’re a US citizen nomad at any income level.
Since my income is more than the FEIE amount, I have recently been reducing my tax by contributing to a self-employed 401k and using the Foreign Housing Deduction to reduce my taxable income. I still had to pay self-employment tax but I got my effective tax rate down to around 10%.
However now that my income is increasing and my desire to pay taxes to a country I rarely visit is decreasing, I have a more sophisticated tax strategy. I have a Dubai Free Zone corporation, which pays me a salary equal to the FEIE so I pay no income tax. Any excess money flows into a C Corp in the US which I own. That corporate profit gets taxed at 10.5% since it owns no US entities, and I can take distributions for another 15% tax.
HOWEVER, instead of taking those taxable distributions, I can use that money in the C corp to make investments around the world, such as real estate. By using this new structure I expect to reduce my effective tax rate to under 5%.