Obamacare taxes fall into three categories:
1. The penalty for NOT purchasing health insurance.
U.S. citizens abroad are NOT subject to this fine. The theory is that they have health insurance in their country of residence.
2. The penalty imposed on U.S. citizens abroad for NOT filing required “Information Returns” confirming they have health coverage in their country of residence
3. The 3.8% tax on certain investment income.
U.S. citizens abroad ARE subject to this tax. In addition, U.S. citizens abroad are MORE LIKELY than homelanders to be subject to this tax. There are two reasons for this:
A. Most Americans abroad will use the “married filing separately” category (which is a “hidden tax” on Americans abroad) which means they will be subject to this tax over a threshold of only $125,000 of “investment income”; and
B. Americans abroad are subject to more items characterized as “investment income” (example foreign pension plans). Interestingly distributions from Canadian RRSPs ARE subject to the 3.8% Obamacare tax. Naturally, distributions from comparable U.S. retirement plans are NOT subject to this tax.
Hard to believe, but the the 3.8% Obamacare surtax (to finance health care for Homelanders) will be paid by a higher percentage of Americans abroad than Homelanders.
This is consistent with the taxation of Americans abroad. The bottom line is:
The Internal Revenue Code will almost always generate a higher tax U.S. tax liability for an American living abroad than for a comparably situated Homelander American!
Yes, it’s true!