living in Japan, double taxed?

Question

I'm thinking of moving my mostly computer based biz to Japan. I'd still buy and sell things via computer to US customers, use my US bank, pay taxes there, have my computer address as US. But since I'm living in Japan (my wife will work in Japan and use her salary for our living expenses), will I have to pay taxes there as well as in the USA?

By the way, I should say that I don't intend to become a Japanese citizen, since ultimately I want to retire to Florida!

Answer 1

You betcha! As a US citizen you are subject to US taxation on your world wide income regardless of where you live. You may qualify for the Foreign Earned Income Exclusion if you file a timely return. That will allow you to exclude up to $82,400 in earned income from US taxation if you meet the foreign residence test or the physical presence test. Alternatively you may take a credit for any foreign income taxes paid. You can figure your tax both ways and file whichever way is most beneficial to you.

Get a copy of IRS Pub 54 from the IRS website. It will tell you pretty much everything you will need to know about US taxes for ex-pats.

Answer 2

Yes you are liable for U.S. taxes BUT if you make below a certain amount (I think it was $75,000 a couple of years ago, but you'll have to check the limit now) you have to file, but you don't actually owe anything. So I suppose that whether or not you pay anything will depend on how successful your business is. ; )