Please note: We are not tax attorneys and any content here should not be construed as legal tax advice. For specific legal requirements and or consulation, please consult a dedicated and licensed tax attorney.
If you are an American living in Ecuador, you need to consider the taxes that you need to pay your home country. That’s right. Although you are not living in the US, you are still required to pay taxes. The US tax code requires you to comply with this law – lest you suffer the consequences.
It all seems unfair but given the protection that you will continue to receive from your home country, you simply just have to comply. So if you are earning extra money in Ecuador, you may want to declare these so you will not get in trouble with the IRS. They do have a very long arm after all.
Fortunately for you, living in Ecuador makes the tax compliance all the more possible. The low cost of living will allow you to free up some of your finances. This will help you set aside money so you can afford to pay the taxes that your home country will be requiring from you. And if you are a senior citizen living in this country, you can even save more because of the many benefits and discounts that you will receive.
Tips to save on taxes for Americans living in Ecuador
Although paying taxes may seem bothersome because it is an additional expense, there are ways for you to save on them. Here are some of the tips that came from TaxIntelligence.us.
Hold a residency visa. If you are living in Ecuador, this will help you lower the taxes that you have to pay to your home country. You will be considered a resident of Ecuador if you are also paying the local taxes and if you had been living in the country for a year.
Be physically present in Ecuador for at least 330 days. This physical presence in the country should be legal of course. Not only that, you have to complete a stay of 330 days out of the 365 days in a year. Take note that if you travel to the US, that will not be counted. That means any travel outside of Ecuador would have to be limited to 35 days or less. Otherwise, you will not be qualified for any tax breaks.
Choose your tax filing status. This is applicable for Americans living in Ecuador who are married to an Ecuadorian. Actually, as long as the spouse is not a US citizen nor do they hold a green card, this is applicable. The American expat should choose to file MFS or Married Filing Separately. Any joint accounts or investments should be avoided so that the foreign spouse will not be subjected to the taxes being paid to the US government. Joint investments between spouses may be taxed for capital gains so it is better to separate financial activities so the couple will not be taxed together.
Any foreign taxes paid should be converted to US dollars. If you are paying local taxes, you need to declare that. One of the benefits of living in Ecuador is they use the US dollar currency. There is no need for your to do any conversion. This will help you get tax breaks.
Deduct any housing cost that you spend in Ecuador. There are qualified housing expenses that you can deduct from your taxes. These include rent, utilities, repairs, insurance, etc. You need to know about these so you can maximize the tax breaks you can get.
Contribute to US tax-advantaged accounts. These include traditional IRAs, 401(k)s and even 529 plans for family members who have yet to go to college. These can give tax savings in the long run too.
Do not make deductible contributions towards US tax plans if it is with an income that is already deducted with foreign taxes. Be very careful when make these tax deductions. It may come off as inefficiency on your part.
The last advice coming from the site is to stay organized. Filing taxes can be very tedious and you may want to have all your financial documents in order to help you do this task easily.
Living in Ecuador and still paying your US taxes may seem unfair but you will realize that staying on the legal side could be worth your while in the end.
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