tax question to americans trading us market while living in foreign country

in4some · Sep 21, 2008

I heard, if u live outside of us, u have $90k tax deduction for individual and $180k for a couple.

does this apply to us income trading us market through us broker while u live in foreign country?

or it only applies to foreign income?

thanks in advance.

AllenCook · Sep 21, 2008

You can easily find the "correct" information from the web. Go to the IRS website and find publication 54. In general, there is an "exclusion" for foreign earned income of $85,700 (2007) but as always, there are other things to consider.

Here, I will even help you out a little bit:

http://www.irs.gov/formspubs/lists/0,,id=97819,00.html

in4some · Sep 21, 2008

AllenCook thanks for the link. but I still can't figure it out.

let's say I live abroad and trade us stock market there.
as I know, the income from my trading is treated as earned income since I elected MTM status. thus the performance of trading happens abroad and I live abroad over 330 days there.
but what I confuse is that the real trading happens here in us even though I press the button there.
so does it consider 'foreign earned income' or not?

thanks in advance.

mgarc · Sep 21, 2008

you have to set-up an LLC to trade through. then you can have the LLC pay you a salary which would fall under "foreign earned income".

moarla · Sep 21, 2008

if you live outside US for more than 180 days, you should pay taxes there where you live....so no taxes to US... If you live in anguilla, there is 0 tax you pay 0 tax :-)

bidask · Sep 21, 2008

Quote from mgarc:

you have to set-up an LLC to trade through. then you can have the LLC pay you a salary which would fall under "foreign earned income".

are you sure about this?

mgarc · Sep 22, 2008

Quote from bidask:

are you sure about this?

that is my understanding based on my own past research. trading income is not earned income as it is not a salary, thus the LLC route.

Swan Noir · Jan 4, 2016

The concept of a Controlled Foreign Corporation is key for US citizens to understand.

Sig · Jan 4, 2016

Swan Noir said:
The concept of a Controlled Foreign Corporation is key for US citizens to understand.

Absolutely. In general an LLC is going to do nothing for the OP.

ballsofgold · Jan 7, 2016

Sig said:
Absolutely. In general an LLC is going to do nothing for the OP.

hmmm, if he elects to treat his foreign entity has a single member LLC and not a corporation, then the company comes back to the individual. then it is considered a disregarded entity and not an FCC...i think all he would have to do is file a schedule C on his personal tax return on which he can elect mtm status.....going the FCC route is very laborous i believe jsut for trading.
i am not 100% sure of the implications of how foreign earned income applies if he choses this route, but if he is trading 1256 contracts, should not matter much anyway as you get the federal 60/40 tax benefit...not sure of stocks

he needs to seek the advice of a certified professional accountant