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Arujei

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1 Oct 2014
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So this is to be my future situation. It's a combination of US and Japan tax question.
I current work for a company in New Zealand while living in the US as a US citizen. In the US I play self employment taxes since I'm technically a contractor since the NZ company doesn't have a US office yet.
I am planning in about a year to go down to Japan to visit, vacation a bit, and then study Japanese and move on to business Japanese studies. 1-2 years worth of study.
During this time I will continue to hold my employment with NZ.
So my question is what do you think I'll be dealing with when it comes to taxes on Japan and US?
 
Hello Arujei,
The 2013 Japan Tax Guide] should help you figure out the Japan side of things.
In particular, your Japan tax liability depends on your residence status, so you'll want to check out pages 3 and 4 of the tax guide. You will probably be a non-permanent resident with income from non-Japanese sources (paid abroad).

For US tax purposes, it doesn't really matter where you are, the US wants to tax your income. You may take a credit for taxes paid to Japan, or you may be able to exclude some/all of your income as part of the "Foreign Earned Income Exclusion".

Publication 54 (2013), Tax Guide for U.S. Citizens and Resident Aliens Abroad

The US tax law is fabulously complex, and you situation, while not unique, will not be a very common one. If you are earning a fair amount of money from your NZ company, you should think about consulting someone with experience in international taxation issues.

If you want a rough idea before talking with a tax pro, I would first use the Japan Tax Guide to figure out what your Japan income taxes will be, and then figure out what your US income taxes would be, and whether you should take the deduction or the credit. If you satisfy certain requirements the US allows you to deduct up to $97,600 of your foreign earned income (making your foreign earned income virtually tax free, a situation which some US citizens mistakenly think absolves them from even filing in the first place).
 
Well, to clarify, you'll probably still have to pay social security and Medicaid even with FEIE. At least I did.
 
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