Expatriate Living off Interest & Dividend Income; Tax Rate If No Earned Income?

[bluegill_04]

US expatriate living abroad wants to know up to how much is tax-free: will have interest income, dividend income and some capital gains from my taxable brokerage accounts in 2023. If you have no earned income, are such income tax-free up to your standard deduction ($12,950 for single in 2022)? I know that the qualified dividend tax rate is the same as capital gains: if so, then up to $41,675 in such income (2022's first bracket limit) would be tax free? I realize it might be different for state income taxes (NJ).

Trying to minimize taxes while living abroad and it could determine which ETFs I choose to go into: e.g., US Treasury bond ETFs (VGSH) vs. income ETFs (such as SCHD) vs. S&P 500 (VOO).

Edit: Another question: while employed and living in the US, always filed TurboTax online. I know that the choices are TurboTax, HR Block, and TaxSlayer. I want to play around using different income sources (interest, divs, cap gains) to optimize investment allocation. If so, buying the non-online version of one of those would be ideal, right?

 

[genenco]

@bluegill_04 The question really should be more about the tax code of wherever you're living rather than of the US.

 

[nilo74]

@genenco yeah, kind of a pointless question without the OP stating where he lives now. That will determine the tax bill.

 

[bluegill_04]

@nilo74 Sorry, I'm living in South Korea now and have a long-term visa. Semi-retired with no earned income from South Korea nor US. All unearned income are from US-based brokerage / bank accounts where all the money is.

 

[nilo74]

@bluegill_04 so, I'm no expert on South Korean tax policy, but generally speaking, once you've lived in a country for 183 days within a 1 year period, you are considered a tax resident of that country and are obliged to pay income and social security tax to that country. Lucky us, as Americans we still have to also file income taxes here, but can exclude certain income from taxation. here.

so, your tax strategy is probably completely meaningless since it doesn't account for ROK tax policy. Broadly speaking, you pay the ROK first, then on your US taxes, claim either income exclusions or tax credits to (hopefully) avoid double-taxation.

 

[nilo74]

also, I should point out, you mentioned no "earned income from South Korea nor US." but, if you work remotely for clients in other countries, such as some consulting or freelance work, and you were physically located in ROK when you did that work, that is considered Korean income and likely subject to income tax there. The location of the client receiving the work generally doesn't matter; what matters is where you are when the work was done.

Again, ROK may see things differently, so definitely consult a tax expert there.

 

[tyler112]

@bluegill_04 As far as your US tax obligations, yes this is broadly true. However, the details depend on your country of residence; whether that country considers you a tax resident; its taxation on interest, dividends, and gains; your marital/family status; whether you qualify for FEIE; income sourcing rules according to domestic law and treaty; other tax credits you may be eligible for; AMT, etc. We really need a bit more detail.

 

[bluegill_04]

@tyler112 Single, living in S Korea for now, arrived in Nov. 2021, lived the entire year in 2022 except for 2 weeks visiting US. Long-term visa in SK that will expire in Nov. 2023 (trying to get that renewed).