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to those w large investment holdings & working in Japan.
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stumptowny



Joined: 29 May 2011
Posts: 223

PostPosted: Wed Jan 22, 2014 12:44 am    Post subject: to those w large investment holdings & working in Japan. Reply with quote

I am becoming very profitable from my investments back in the states and have a tax question.

as a teacher in japan, I make peanuts. it's great as a tax shelter because my short term capital gains tax is very low, as it is based on my income.

my question:

does filing the foreign income exclusion automatically put us in the lowest rate (10%) for short term capitals gains taxes?

most of us teaching in japan fall in the:

$17,851-$72,500: 15% tax rate IF we were making this income at home.

Does the foreign income exclusion default our earnings to zero though?

or to the lowest tax rate:

$17,850 Income or less: 10% - Tax Rate??

the tax savings are dramatic. 10% is much better than paying 15% when your investments are in 6 figures..

savings will be in the thousands of dollars depending on tax rates...


Last edited by stumptowny on Wed Jan 22, 2014 8:50 am; edited 1 time in total
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mitsui



Joined: 10 Jun 2007
Posts: 458
Location: Kawasaki

PostPosted: Wed Jan 22, 2014 1:52 am    Post subject: Reply with quote

Two questions:
Are you American?
What kind of visa do you have?

I heard that getting permanent residency is a bad idea due to taxation.
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stumptowny



Joined: 29 May 2011
Posts: 223

PostPosted: Wed Jan 22, 2014 2:41 am    Post subject: Reply with quote

[quote="mitsui"]Two questions:
Are you American?
What kind of visa do you have?

I heard that getting permanent residency is a bad idea due to taxation.[/quote]


hi.

1) $ = American

2) I pay taxes in the USA for capital gains (investments).. figuring that rate is tricky with the foreign earned income exclusion. that is the clarification i seek..
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Inflames



Joined: 02 Apr 2006
Posts: 403

PostPosted: Wed Jan 22, 2014 2:58 am    Post subject: Reply with quote

The foreign income exclusion defaults earnings to zero for these purposes, I believe (I also believe that if your overseas earned income exceed the exclusion, you start paying from the tax bracket you would be at from the total amount, just the amount excluded isn't calculated). Note that I'm not a tax expert so you should contact someone who is, or the IRS.
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mitsui



Joined: 10 Jun 2007
Posts: 458
Location: Kawasaki

PostPosted: Wed Jan 22, 2014 3:21 am    Post subject: Reply with quote

You could have a problem since if you have at least $10,000 in a bank account outside the USA you must declare it every year.
That is the FBAR form.
It must be filed separately. I think it goes to Detroit and the deadline is June 30th.
This includes back filing too.

Also, if your income is over 92,000 in a year you will have to pay US taxes.
Income does not just include that made from teaching.

There is a reason why some Americans have renounced their citizenship.
Tina Turner is the just the latest of many.
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stumptowny



Joined: 29 May 2011
Posts: 223

PostPosted: Wed Jan 22, 2014 3:49 am    Post subject: Reply with quote

[quote="Inflames"]The foreign income exclusion defaults earnings to zero for these purposes, I believe (I also believe that if your overseas earned income exceed the exclusion, you start paying from the tax bracket you would be at from the total amount, just the amount excluded isn't calculated). Note that I'm not a tax expert so you should contact someone who is, or the IRS.[/quote]

... defaults to zero for INCOME tax purposes (ie 1040/state forms).

the short term capital gains tax rate is different. its based on income level but I don't think excluded income?? I am hoping it does because then I would be at the minimum 10% rate for capital gains.. which will save me thousands in taxes..

thinking Ill have to get lucky here on dave's by finding someone in the same, enviable position who can relate their tax experiences

...or contact the IRS! ugh! you may be right...


Last edited by stumptowny on Wed Jan 22, 2014 4:03 am; edited 1 time in total
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stumptowny



Joined: 29 May 2011
Posts: 223

PostPosted: Wed Jan 22, 2014 3:51 am    Post subject: Reply with quote

[quote="Inflames"]The foreign income exclusion defaults earnings to zero for these purposes, I believe (I also believe that if your overseas earned income exceed the exclusion, you start paying from the tax bracket you would be at from the total amount, just the amount excluded isn't calculated). Note that I'm not a tax expert so you should contact someone who is, or the IRS.[/quote]

... defaults to zero for INCOME tax purposes (ie 1040/state forms).

the short term capital gains tax rate is different. its based on income level but I don't think excluded income?? excluded income takes our tax basis to zero so we don't pay income tax at home also. but for those of us with investment gains, we have to pay capital gains taxes, of which, the rates are set based on your income.. its a bit twisted..

thinking Ill have to get lucky here on dave's by finding someone in the same, enviable position as myself who can relate their tax experiences

...or contact the IRS! ugh! you may be right...


Last edited by stumptowny on Wed Jan 22, 2014 4:17 am; edited 1 time in total
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stumptowny



Joined: 29 May 2011
Posts: 223

PostPosted: Wed Jan 22, 2014 3:57 am    Post subject: Reply with quote

[quote="mitsui"]You could have a problem since if you have at least $10,000 in a bank account outside the USA you must declare it every year.
That is the FBAR form.... [/quote]


thanks. neither of these points apply to my post inquiry.. better for an applicable post..
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Inflames



Joined: 02 Apr 2006
Posts: 403

PostPosted: Wed Jan 22, 2014 4:25 am    Post subject: Reply with quote

I've simply filled out the forms using the foreign earned income exclusion to reduce my earnings to zero and then adding capital gains, then using deductions to lower the amount.
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stumptowny



Joined: 29 May 2011
Posts: 223

PostPosted: Wed Jan 22, 2014 7:28 am    Post subject: Reply with quote

[quote="Inflames"]I've simply filled out the forms using the foreign earned income exclusion to reduce my earnings to zero and then adding capital gains, then using deductions to lower the amount.[/quote]

did you have short term capital gains taxes?
what was your % rate on those?

on your 1040, the AGI is still what you earned in japan (tweaked a little if you can claim any of those AGI perks). but nothing reduces your earnings on the 1040 form itself to zero, as you claim, from the earned income exclusion (eie). however, you must write on the 1040 "2555ez"(the eie form #...) however, to let the IRS know the income is moot, although it is tabulated normally.

for my purposes, the income then DOES appear as the income from japan. it is not zero, ever, anywhere on the 1040... I would love it to show zero! then I would lock in 10% tax rate for my short term capital gains tax..

so...

how does your 1040 amount to zero?

... because you must bring over the amount from line 18 of 2555ez and put that amount on 1040 line 22 as instructed. that number being brought over is not zero. its your japanese earnings to be excluded...

then, when you run through and complete the 1040, the income amount never becomes zero.. its essentially tabulated, going down the 1040 row-by-row, as if you made the money in the states (but then its waived..) so we are not double taxed..

where on your 1040 does it start to show as zero? what line?

thanks for your detail flames... much appreciated!
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Solar Strength



Joined: 12 Jul 2005
Posts: 560
Location: Bangkok, Thailand

PostPosted: Wed Jan 22, 2014 11:59 am    Post subject: Reply with quote

Why can't you quote properly?

Every single one of your quotes is not formatted properly, which makes it difficult to read.
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Inflames



Joined: 02 Apr 2006
Posts: 403

PostPosted: Wed Jan 22, 2014 2:41 pm    Post subject: Reply with quote

You were filling out the forms incorrectly.

You report your total earned income on line 7. The amount of the exclusion is listed on line 21, and any difference is added to the other amounts to get to the amount on line 22.
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G Cthulhu



Joined: 07 Feb 2003
Posts: 1304
Location: Way, way off course.

PostPosted: Wed Jan 22, 2014 4:40 pm    Post subject: Reply with quote

Buy a copy of Turbo Tax and let that deal with it. Your situation isn't complicated enough to require anything more.
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stumptowny



Joined: 29 May 2011
Posts: 223

PostPosted: Thu Jan 23, 2014 1:41 am    Post subject: Reply with quote

[quote="G Cthulhu"]Buy a copy of Turbo Tax and let that deal with it. Your situation isn't complicated enough to require anything more.[/quote]

I want to know about my finances.. you should also be personally vested in yours.. it's why I am making bunches of money...
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stumptowny



Joined: 29 May 2011
Posts: 223

PostPosted: Thu Jan 23, 2014 1:42 am    Post subject: Reply with quote

[quote="Inflames"]You were filling out the forms incorrectly.

You report your total earned income on line 7. The amount of the exclusion is listed on line 21, and any difference is added to the other amounts to get to the amount on line 22.[/quote]

thanks flames. I'll check it tonight. tried calling the IRS and that is a death spiral.. if i find an answer to my question, I'll post it here. that being my short capital gains tax rate...
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