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When considering working in Costa Rica you might want to think about what Costa Rican wages are. Even skilled professionals get paid a fraction of what they do in the US. Yes, the cost of living in Costa Rica is less but the typical Tico family also lives on MUCH less than we do. They do without many things. In a typical Tico country house they may not have hot water, not even one of those instant in-line water heaters. They may cook and wash laundry by hand in the same sink. Kitchens commonly do not have ovens, only a hot plate or propane stove top.
Some things in Costa Rica cost MORE then in the US. Automobiles and most imported goods cost a great deal more. Food is cheaper as long as you buy fresh local produce but canned and packaged goods are often equal to or higher than in the US. During recent shopping trips to a Costa Rican supermercado we paid roughly the same as we would at home in rural North Carolina. Rents and realestate are rising to US prices in many places. Services like the internet and cable TV are becoming more common but are more expensive than in the US.
It is something to think about. Spend some time in Costa Rica. Get out of San Jose and visit the provinces (not the tourist areas) and see what real Tico life is about. If can be a wonderful simple life. But it may not be what you expect.
OK, First thing you need to do is go to the IRS documentation OR a tax lawyer. However, here is what I know and found on the IRS web site.
You are exempt from US taxes UP TO $80,000 income earned anywhere after one year IF you live outside the United States for a full year as defined by the IRS (330 days during any 12 consecutive months). You still must file but this exemption applies. See IRS publication 54.
http://www.irs.gov/pub/irs-pdf/p54.pdf
“. . .These benefits are called the foreign earned income exclusion and the foreign housing deduction and exclusion.”
SO. . . You may visit the US for up to 35 days in any 12 month period and still meet the living outside the US rule. Your income must also be earned outside the US. That does not mean the income does not come from the US, it means you did the work to earn it outside the US. Your business model may be critical to how this works. Your “tax home” must be outside the US (place of abode, workplace, personal bank accounts).
This is a significant exemption. Besides this you are also not lible for Costa Rican income taxes if all your income comes from outside Costa Rica. However, there are rumblings that this may change.
Once you achieve this exemption for the first year it is supposed to be easier in following years. However, as long as you are a US citizen the IRS is part of your life.
State taxes are a different matter. . .
