Expatriation Overview

By Jon Scott

Want to live outside the US? Well there’s a process to becoming an expat. For those unaware, an expat is someone who decides to live outside of their native country. In 2020, an estimated 9 million US citizens lived abroad. We’ll walk through the steps on how to do so.

Perhaps a good question for those on the fence or so far unconvinced is: why move abroad? FIrst, with the explosion of remote work there is an opportunity for many to work from anywhere. Labeled digital nomads, there is a whole Reddit form dedicated for those who work from countries outside of the US. You can find a website for advice on moving to nearly any country. Many expats use their locational freedom to live in and work from countries that spark their interest. Others use their travel and experience as part of their work, staring websites documenting their experiences

You will have to figure out which country you actually want to expatriate to. This requires setting a list of criteria for the type of country you want to move to. Your biggest draw may be the culture in that country or maybe the natural habitat. Or perhaps you’re more drawn to learning a new language or interested in exploring the history of that country. Is cost of living a factor? Whatever your preferences are, you will want to define your qualifications and create a list of countries that fall into your preferences.

Visa Status

Depending on the country, you may need to apply for a specific visa in order to live and work in the country. You can access the US State Department website to check the “Entry, Exit, and Visa Requirements” for your desired destination.

Visit your desired destination

As magically as moving to your desired country sight unseen seems, you will definitely want to visit the country you intend to move to and stay for at least a few weeks, if not a couple months. Check out our article on vacationing abroad. Getting a feel for the country over several weeks will identify what aspects of the country you like and dislike. In addition, you can scout out living arrangements and ultimately find out if living in that country is feasible. It’s possible that country just isn’t for you, and you will want to identify this information before making the big move.

How to prepare financially

You will first want to determine the cost of living where you are moving. Most expats prepare to move to a new country by selling nearly all their assets. This includes possession such as furniture and cars, as well as any residences you own or live in. However, if you have already saved more than $8,000 (per person) you may consider turning your residence into a rental property if possible. Ideally you will save more than that closer to $20,000 to be safe–again the amount saved will fluctuate by the cost of living where you choose to move.

Next, you will want to create a budget. Estimate the cost of housing, food, transportation, utilities, insurance, and any miscellaneous expenses. Again, you can usually find websites, blogs, or reddit forms with this information.

If you are not working remotely or leaving your previous position, you will want to to find a job in your desired country or enroll in an educational institution in the desired country. However, you may be eligible for the foreign earned income exclusion, the foreign housing exclusion, and/or the foreign housing deduction act.

Lastly, you will want to make sure your funds will be available overseas. There are a number of US banks providing low cost banking overseas. Also, make sure to choose a credit card without international transaction fees.

Taxes when you are abroad

You must still file a US tax return if you live abroad. Regardless of if you are currently living in the US or not, worldwide income is subject to US taxes if you are a citizen. However, you may be eligible for several exemptions including the foreign housing exclusion and/or the foreign housing deduction. These two exemptions allow you to discount your foreing housing amount from your income tax if your home is in a foreign country and you qualify for either the bona fide residence test or the physical presence test. The bona fide residence test means you are present in a foreign country or countries for an entire uninterrupted year that includes the entire tax year.The IRS defines the physical presence test as “being physically present in a foreign country or countries 330 full days during any period of 12 consecutive month including some part of the year at issue.”

What to have prepared before moving

  1. Make sure you have a passport

  2. Define the qualifications for the country you are moving to

  3. Whittle down your list to the countries that meet your qualifications

  4. Visit the country or countries of your choice for several weeks

  5. Decide on the country you are moving to.

  6. source of income/educational opportunity before moving

    1. Whether it be a remote job

  7. Gather your savings and make sure they are liquid and that your banking institution provides services overseas.

  8. Secure a place to stay

  9. Have the required Visa

  10. Book your travel arrangements (depending on the Visa requirements you may have to book travel arrangements before)