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How Chris Johnson could decrease his income tax from 37% to 4%.
What about you (other US citizens)?
Can you do it, too??
@CJ_Johnson17th
What about you (other US citizens)?
Can you do it, too??
@CJ_Johnson17th
Moving and saving tax
Chris mentioned moving to Las Vegas recently, which is a great move from a tax perspective as Nevada does not have a state income tax.
This is saving him 6-13% of his income, depending on what state he used to live in (or could live in).
Chris mentioned moving to Las Vegas recently, which is a great move from a tax perspective as Nevada does not have a state income tax.
This is saving him 6-13% of his income, depending on what state he used to live in (or could live in).
I’ve written some threads recently about paying 0% income tax, one documenting how @lawrencekingyo does it, but this one will apply to @CJ_Johnson17th, a US citizen, specifically. https://twitter.com/askfortaxadvice/status/1298824986229125125
US Citizen
As a US citizen, the plan for @CJ_Johnson17th is different.
The US taxes it’s citizens on their worldwide income, whether they are US residents or not.
You can’t be a US citizen and not pay tax to the US on all of your income.
As a US citizen, the plan for @CJ_Johnson17th is different.
The US taxes it’s citizens on their worldwide income, whether they are US residents or not.
You can’t be a US citizen and not pay tax to the US on all of your income.
Okay, so what can Chris do?
The rest of this thread assumes you want to keep your US citizenship.
The answer: a tropical island with great people, food, and beaches, that is also a US Territory.
Move to Puerto Rico.
The rest of this thread assumes you want to keep your US citizenship.
The answer: a tropical island with great people, food, and beaches, that is also a US Territory.
Move to Puerto Rico.
Internal Revenue Code Section 933
Let me summarize - Residents of Puerto Rico are exempt from US tax on income derived from work done in Puerto Rico.
Wait, what?
A US citizen can earn income anywhere in the world and the US will tax it, except Puerto Rico?
Yeah, that’s right.
Let me summarize - Residents of Puerto Rico are exempt from US tax on income derived from work done in Puerto Rico.
Wait, what?
A US citizen can earn income anywhere in the world and the US will tax it, except Puerto Rico?
Yeah, that’s right.
Resident of Puerto Rico
You have to move there. You, spouse, and children. Move into a home there and leave your home in the US.
Mail, drivers license, health insurance, card moved, property moved, etc need to change.
You also need to be there at least 183 days per year.
You have to move there. You, spouse, and children. Move into a home there and leave your home in the US.
Mail, drivers license, health insurance, card moved, property moved, etc need to change.
You also need to be there at least 183 days per year.
Once you become a resident of Puerto Rico, you need to file forms with the IRS to get your income exempt and with Puerto to qualify for special tax rates: 4% and 0%.
Remember once a resident, income you earn in Puerto Rico will not be taxed by the IRS.
Remember once a resident, income you earn in Puerto Rico will not be taxed by the IRS.
What about Puerto Rico, don’t they have tax?
Puerto Rico Article 20 - Puerto Rico businesses that provide services to clients outside of Puerto Rico pay an income tax of only 4%.
Article 22 - Residents of Puerto Rico by 0% tax on dividends and interest.
Puerto Rico Article 20 - Puerto Rico businesses that provide services to clients outside of Puerto Rico pay an income tax of only 4%.
Article 22 - Residents of Puerto Rico by 0% tax on dividends and interest.
What does this mean for Chris?
Well, first, his $100k of dividends per year would be taxed free, versus the 24% he’s paying on it in the US.
His qualifying business income could be 4% instead of 37% in the US.
Well, first, his $100k of dividends per year would be taxed free, versus the 24% he’s paying on it in the US.
His qualifying business income could be 4% instead of 37% in the US.
Qualifying Business Income
Puerto Rico wants to connect to the global economy by having businesses in Puerto Rico perform services for clients outside of Puerto Rico.
Puerto Rico wants to connect to the global economy by having businesses in Puerto Rico perform services for clients outside of Puerto Rico.
Qualifying Business Income
In general, profit from services such as marketing, consulting, research, etc that are given to clients based outside of Puerto Rico will only be taxed at 4%.
Any business income Chris makes that qualifies would be taxed at 4% versus 37% in the US.
In general, profit from services such as marketing, consulting, research, etc that are given to clients based outside of Puerto Rico will only be taxed at 4%.
Any business income Chris makes that qualifies would be taxed at 4% versus 37% in the US.
What does this mean for Chris?
If he has $1m of qualified business profits he saves $330k of tax.
If he has $200k of dividend income, he saves $48k of tax.
That’s serious cash. That is quite the annual dividend for moving and setting up shop in Puerto Rico.
If he has $1m of qualified business profits he saves $330k of tax.
If he has $200k of dividend income, he saves $48k of tax.
That’s serious cash. That is quite the annual dividend for moving and setting up shop in Puerto Rico.
What else?
There’s some tax stuff to think through on appreciated assets when making the move, but nothing crazy.
Basically, @CJ_Johnson17th, if you are willing to move to Puerto, you stand to save a lot of tax every year.
There’s some tax stuff to think through on appreciated assets when making the move, but nothing crazy.
Basically, @CJ_Johnson17th, if you are willing to move to Puerto, you stand to save a lot of tax every year.
Who am I?
First, @CJ_Johnson17th didn’t ask me to write this. He’s just done a lot for our community and I wanted to do something for him.
Hopefully this can help others (like YOU) as well.
As for me, I’m just a guy that drops tax planning threads every week! Follow to save!
First, @CJ_Johnson17th didn’t ask me to write this. He’s just done a lot for our community and I wanted to do something for him.
Hopefully this can help others (like YOU) as well.
As for me, I’m just a guy that drops tax planning threads every week! Follow to save!
