Do I have to pay US income tax if I am a US citizen married to a European living and working abroad?
If I am married to a Swedish citizen and am living and working in Sweden, do I pay US income tax? If so, how much? And how do I eventually stop? Would I have to renounce citizenship? We never plan on going back to the US.
I have a Swedish personal number, i.e Swedish SSN. I won’t be using my American SSN at all. My question is, how would they even know I was working here?
The US is one of the few countries that taxes on the basis of citizenship rather than residence. In order to keep US workers abroad competitive with other international workers, it excludes from taxation a fixed amount of money earned abroad, known as the foreign earned income exclusion. For 2007, that amount was $85,700. That sum is free of US taxes.
Anything beyond $85,700 is subject to US tax, unless you are paying taxes at an equal or higher rate elsewhere. If paying higher taxes abroad, you can use a foreign tax credit to offset your US tax liability. If there are low or no taxes overseas, then according to the law, the first dollar of compensation above $85,700 is taxed at the rate it would be taxed at as if the person were living in the United States. Previously it had been taxed as if it were the first dollar earned, at the lowest rate.
One of the other posters suggest renouncing your US citizenship. Think about that long and hard before acting as there are far-reaching consequences.
Section 349(a)(5) of the Immigration and Nationality Act (INA) (8 U.S.C. 1481(a)(5)) is the section of law that governs the ability of a US citizen to renounce his or her citizenship. That section of law provides for the loss of nationality by voluntarily performing the following act with the intent to relinquish his or her US nationality:
“(5) making a formal renunciation of nationality before a diplomatic or consular officer of the United States in a foreign state , in such form as may be prescribed by the Secretary of State”
A person wishing to renounce his or her US citizenship must voluntarily and with intent to relinquish US citizenship appear in person before a U.S. Consular or diplomatic officer, in a foreign country (normally at a U.S. Embassy or Consulate); and sign an oath of renunciation
Renunciations that do not meet the conditions described above have no legal effect. Because of the provisions of section 349(a)(5), Americans cannot effectively renounce their citizenship by mail, through an agent, or while in the US.
A person who wants to renounce US citizenship cannot decide to retain some of the privileges of citizenship, as this would be logically inconsistent with the concept of renunciation. Thus, such a person can be said to lack a full understanding of renouncing citizenship and/or lack the necessary intent to renounce citizenship, and the Department of State will not approve a loss of citizenship in such instances.
Persons intending to renounce US citizenship should be aware that, unless they already possess a foreign nationality, they may be rendered stateless and, thus, lack the protection of any government. They may also have difficulty traveling as they may not be entitled to a passport from any country. Even if they were not stateless, they would still be required to obtain a visa to travel to the United States, or show that they are eligible for admission pursuant to the terms of the Visa Waiver Pilot Program (VWPP). If found ineligible for a visa or the VWPP to come to the U.S., a renunciant, under certain circumstances, could be barred from entering the United States. Nonetheless, renunciation of U.S. Citizenship may not prevent a foreign country from deporting that individual back to the US in some non-citizen status.
Also, persons who wish to renounce US citizenship should also be aware that the fact that a person has renounced U.S. Citizenship may have NO EFFECT whatsoever on his or her US tax or military service obligations. In addition, the act of renouncing US citizenship will not allow persons to avoid possible prosecution for crimes which they may have committed in the US, or escape the repayment of financial obligations previously incurred in the US or incurred as US citizens abroad.
Hope this helps a bit.
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