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FIRE: Tax Benefits for Non-US Citizens

Help yourself (possibly) and your non-American family/friends save on taxes.

Paying taxes may be the least fun activity after paying student loans.

The truth is, finding real tax breaks that exist (and are legal) can be an incredibly "taxing" (pun intended) exercise in itself so when an obvious one arises, take advantage.

In this case, we are referencing the zero US taxation on bank deposit interest earnings (+ US Treasury securities - but I'll hold off touching on them here) and capital gains earned on US equities (stocks) by non-US citizens.

This does not mean you will avoid taxes altogether (your/their home country will still tax them).

But there are countries where residents can eliminate taxes entirely:

The Bahamas, British Virgin Islands, Brunei, Cayman Islands, Monaco, Oman, Turks and Caicos, United Arab Emirates, Vanuatu.

Or reduce the tax burden drastically:

Anguilla, Belize, Costa Rica, Georgia, Gibraltar, Guatemala, Hong Kong, Macau, Malaysia, Malta, Nicaragua, Panama, Paraguay, Qatar, Singapore, Thailand, Uraguay.

If you are a resident or and friends/family of a resident from any of the countries listed above, this is a great opportunity to generate income from US assets.

Quick pause - the obvious notion that may arise to you is if you should have friends/family in those countries, you should transfer some capital/assets to them so they can earn more.

I'm not promoting tax dodging in anyway & the IRS is aware this may happen. But, per the IRS gift tax guidelines, technically you could transfer up to $15,000 to a non-spouse (in either direction) without any tax requirements or up to $157,000 to a spouse (if the other spouse is a non-resident).

Maybe it's just me, but this appears to be promoting finding a partner/spouse in one of the low/no income tax countries listed above.

Regardless, you theoretically & legally transfer/"gift" money to a non-spouse, diminishing all legal ownership/rights to the assets, of up to $15k, and increase your overall family/friends group's net earnings potential.

You may lose out technically in the short run, but doing good for the family/close-friends would presumably pay off when they take care of you later.

That all being said, these family/friends will have 2 primary vehicles to use to their advantage (mentioned before):

1. US Federally Chartered Bank Savings Deposits - interest earnings (& US bonds/bills/notes technically)

2. US Stocks - capital gains

For comparative sake, US citizens can pay as high as 20% on long-term capital gains taxes and as high as 37% on income taxes.

That's crazy compared with 0%.

One way to structure a vehicle between a US resident and a non-US resident would be through a jointly-owned LLC. This will also theoretically let you expand the number of individuals involved.

Filing an LLC with your state is simple but you will want to do a secondary check on state laws to ensure no additional state gifting taxes exist.

Once the LLC is filed, you simply will need to open a business bank account at a high-yield savings bank to earn deposit interest and open a brokerage account (Fidelity/Schwab/Vanguard) in order to purchase US equities with capital gains potential (growth stocks rather than dividend machines).

Not difficult but does require some time & effort.

In the long run, you can increase your family's overall net-worth considerably by simply optimizing ownership of assets (bank account deposits & stocks).

Happy saving.

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