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Exclusion to U.S. income taxes while living in Costa Rica

Discussing payment of taxes, the IRS, or anything remotely related to the U.S. government are not fun topics!  However, knowing what you might owe Uncle Sam as result of working in Costa Rica, owning a business or selling real estate in Costa Rica, is important.  Below are some details on exclusions to income while residing overseas

In order to qualify for the exclusion to income taxes, you must pass three tests:

Your tax home (place where you work) must be in a foreign country
You must have foreign earned income (does not include lodging, meals, fringes)
You must pass either the "bona fide" residence or "physical presence" test in a foreign country.
The "bona fide" residence test is passed if you have a home in a foreign country for at least one uninterrupted tax year. Generally, the tax law anticipates that you have moved to this country with the intention of staying there for a long while. Most people claim the physical presence test instead.

For additional information, get it right from the source: Tax Guide for U.S. Citizens Residing Abroad

News & Notes

I found an interesting article the other day on living abroad.  Here's an excerpt:

Live better for less in Thailand! Retire to Costa Rica!

Breeze through magazines aimed at retirees and you'll find headlines just like these, urging regular folks, not just the very wealthy, to consider foreign residences.

The allure is clear: lower living costs and warm climates. And as Baby Boomers retire with more foreign travel experience under their belt, they already may have acquired assets, homes or even spouses overseas....

To see the entire article, click here: Overseas Retirement

Also, check out this terrific website on handling tax matters when living overseas:

TaxMeLess!

Enjoy!