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Igloo,
We started the process sixteen months ago and are 34 days from our move. Our household goods are being picked up next Tuesday and we are starting to get really excited. I encourage you to check out Talarke School (www.talarkeschool.com) that was started by homeschoolers and now has 85ish kids from 18 months to sixth grade. It is east of San Jose in San Ramon de Tres Rios. We will be living east of town in El Carmen de Guadalupe. The East side has lots of private school and Protestant Church choices as well. We wanted to be close enough to San Jose to access good health care, have shopping choices, and have other infrastructure related bennies. In our case, we did not want to live in the Escazu/Santa Ana area due to it being more similar to suburban areas here in the States than we wanted. The East side also seems to have fresher air and cleaner water due to the prevalent winds and the mountains. Your money will certainly go much further in the mountains on the east side, the crime rate is low, and you are 20-30 minutes from everything… Good luck!
JerryThank you for your courteous salutation which I think shows your attitude and disdain for those that disagree with some of your points. Please show me where I said it was a fair referendum.
The gist of my response was that it is their choice and they can choose whether this is a good thing or a bad thing for THEIR country. I have confidence that they can build on the positive aspects of the agreement and weed out the potential negative consequences.
Also, I don’t read any of the publications that you ascribe to me. In fact, you seem to make a lot of assertions as to the habits, thoughts, ideas, of people that debate your diatribe.
Have a beer, get some sunshine, relax… Pura Vida!
I could have sworn that this was put to a referendum and that the people of Costa Rica voted for it. I don’t think Bush is too popular in CR so they must have had other reasons for passing it. As for reading the document as mentioned in a response to your post, I think you would find that most people worldwide vote for things without reading every single page. They look to their leaders and the media to digest it for them and give them the pros, cons, and the spin. From what I saw, both sides pitched their points very vocally and a majority of the oft described educated and independent Ticos voted SI! If they choose to let this new set of trade rules ruin their country, that is their choice. I think they are much smarter than that. Hopefully the people that were against it will shepherd and require accountability in the process and not let the potential negatives of the agreement prevail. At the end of the day, it is all their choice, not that of Bush or the USA…
Scara,
I assure you that when your cars were repaired, towed, rented, and sold, the people involved HAD to have the VIN. As others mentioned, there may be models of Galants that are shipped into Costa Rica that DO have manual transmissions and four wheel drive, not to mention diesels. Did you know that while Toyota LandCruiser in the US refers to a large Sport Utility with newer models having V-8s and full time four wheel drive. In parts of Central America, it is a “line” of vehicles. There are Trucks and wagons, and SUVs so if you told someone down there you had a LandCruiser, it could mean a lot of different things to different people. By the way, your VIN is public information and not personal at all. In fact, with your full name and the city you live in I can give you your VIN… I wish you the best of luck in your travels to Costa Rica. If you plan to spend much time there you will find patience is a needed virtue and flexibility is a way of life…
JerryTo my knowledge, and there might be an exception, it does NOT matter where the asset is physically located. A gain is a gain. I have pasted below information from the IRS website.
IRS TAX TIP 2007-34
Almost everything you own and use for personal purposes, pleasure or investment is a capital asset. When you sell a capital asset, the difference between the amounts you sell it for and your basis, which is usually what you paid for it, is a capital gain or a capital loss. While you must report all capital gains, you may deduct only capital losses on investment property, not personal property.
Good luck.
Jerry
David,
You are correct that the income must be earned income. Having said that, if you owned a corporation (US, CR, or otherwise), for which you worked, and the corporation had income from rents or gains from the sale of assets, and you paid yourself a resonable salary from the corporation for the services you perform, that would be earned income. The Corporation would be able to deduct the salary it paid you and you would have a foreign earned income exclusion on your income. So, the net effect could be that the rents, gains, etc. didn’t have taxes. Structure and documentation is important. If you didn’t do so, go to the link that I provided for more detailed information and some easily understood real life examples. http://www.irs.gov/publications/p54/ch04.html
Jerry
mmessier2,
The thought and process of relocating to Costa Rica is exciting and I truly hope that it works out for you. I just wanted to make a quick comment that under current tax law, selling your property shouldn’t cost you 50% in taxes since the brackets don’t go that high and, depending on your holding period, you might qualify for capital gains tax rate. Having said that, we have a new congress and they have said they want to increase tax rates so who knows what might happen down the road. There are lots of strategies and structures that you could put in place to keep yourself in the best possible position to not have a big tax bill.
Jerry
Scott,
The exclusion is 85,700 each. I have cut and pasted part of a post from late June on another thread that clarifies the exclusion. Note that Foreign earned does not mean the income has to be earned in a foreign country just that it is earned while your “tax home” is outside the U.S.
Here are the rules and a link to the law…
In order to qualify for the exclusion, you must pass three tests:
Your tax home (place where you work) must be in a foreign country
You must have foreign earned income (does not include lodging, meals, fringes)
You must pass either the “bona fide” residence or “physical presence” test in a foreign country.
The “bona fide” residence test is passed if you have a home in a foreign country for at least one uninterrupted tax year. Generally, the tax law anticipates that you have moved to this country with the intention of staying there for a long while. Most people claim the physical presence test instead.The “physical presence” test is passed if, during any 12-month period, you were present in a foreign country for any 330 days. They need not be consecutive, nor does the 12 month period have to be concomitant with a calendar or other tax year. For instance, if you were present from July 1 to June 30 the next year, and you only left the country for a couple of weeks at Christmas, you pass the test.
There is a limit on the amount of foreign earned income that can be excluded. The limit in 2007 is $85,700 (inflation-adjusted thereafter). If the bona fide residence or physical presence tests are only passed for part of a year, it must be pro-rated. For example, our taxpayer above who qualified beginning on July 1 could take an exclusion for that year of $42,850 (since 6 of the 12 months were qualified exclusion months). The pro-ration is calculated down to the day.
You must file a timely return in order to claim the exclusion, and claiming the exclusion means that any tax advantages to income (like IRA contributions) are disallowed to the extent that earned income is excluded. Taking the exclusion also disqualifies you from the earned income credit.
In addition to the foreign earned income exclusion, taxpayers can also claim an exclusion for a foreign housing allowance. Congress has restricted the amount that can be claimed. The limit on the foreign housing exclusion is the following formula:
(30% of your own foreign earned income exclusion – 16% of the greatest possible exclusion)
If you are self-employed, you can deduct any foreign housing costs not already excluded by the earned income exclusion or the housing exclusion.
Amounts your employer gives you for lodging are not taxable, so they also cannot be excluded or deducted from income.
Any exclusion or deduction of housing naturally means that you cannot claim mortgage interest deductions or other tax advantages on that housing. No double benefit is allowed.
One of the biggest changes Congress has made in these rules is the so-called “inclusion amount.” Under the prior law, the income and housing exclusions would be taken off of gross income, and whatever was left would have taxes owed.
Now, the amount of income that is left must be taxed as if the excluded income was never excluded. That means that fairly moderate-income taxpayers will face very high marginal tax rates on fairly low amounts of income.
The details can be found here at: http://www.irs.gov/publications/p54/ch04.html
I hope this helps clarify this issue. It is a WONDERFUL thing…
Sincerely,
Jerry
I would like to see how the transfer could be done “Online.” My experience has been that the signatures related to the transfer have to be recorded in the Attorneys book and they sign that they witnessed the signature. I have flown to Costa Rica just to sign stuff…
JerryNewmoon,
To claim a deduction for a business expense here in the US, you must be able to show that the expense was both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary. So, if you are trying to do something that is LEGAL and PERMISSABLE, the consulting or management that the Costa Rican company is doing for your US based business must be ordinary and necessary. Here is a good test. If a reputable and otherwise worthy Costa Rican company that you don’t own offered to do the consulting or management for your US Business, instead of you paying YOUR company to do it, would you hire them instead? If the little voice in your head said, “of course not,” then you are going to have to make payments to your Costa Rican company and carefully document them so that they appear to be ordinary and necessary in case you have to justify them. If you would like to have a private discussion about this topic, please feel free to email me at jdtj777@yahoo.com. We are moving to Costa Rica in December and I WILL be doing business in both places and feel very comfortable about the structure that I have in place to do so.
Sincerely,
Jerry
I could have sworn that this thread was about using an SA to avoid taxes…
It never ceases to amaze me how some people on this forum use any excuse to jump on Bush and the US. If you haven’t left the US already, please renounce your citizenship and hit the road to happiness as soon as possible…
Then, Maravilla, you won’t even have to worry about paying U.S. Taxes. Of course you will have to give up the “bennies” of being a citizen of that horrible country…
Since we are quoting songs, here is Jimmy Buffet: “Expatriated American feelin’ so all alone Telling themselves the same lies that they told themselves back home…
Maravilla, Maravilla, Maravilla…
As long as Chariotdriver meets certain criterion that I will list below, he can live in Costa Rica, run his business, and be paid in the U.S. FROM HIW OWN COMPANY. And, the “Earned Income” exclusion for Chariotdriver and, if applicable, Ms. Chariotdriver, is $85,700 each for 2007. Here are the rules and a link to the law…
In order to qualify for the exclusion, you must pass three tests:
Your tax home (place where you work) must be in a foreign country
You must have foreign earned income (does not include lodging, meals, fringes)
You must pass either the “bona fide” residence or “physical presence” test in a foreign country.
The “bona fide” residence test is passed if you have a home in a foreign country for at least one uninterrupted tax year. Generally, the tax law anticipates that you have moved to this country with the intention of staying there for a long while. Most people claim the physical presence test instead.The “physical presence” test is passed if, during any 12-month period, you were present in a foreign country for any 330 days. They need not be consecutive, nor does the 12 month period have to be concomitant with a calendar or other tax year. For instance, if you were present from July 1 to June 30 the next year, and you only left the country for a couple of weeks at Christmas, you pass the test.
There is a limit on the amount of foreign earned income that can be excluded. The limit in 2007 is $85,700 (inflation-adjusted thereafter). If the bona fide residence or physical presence tests are only passed for part of a year, it must be pro-rated. For example, our taxpayer above who qualified beginning on July 1 could take an exclusion for that year of $42,850 (since 6 of the 12 months were qualified exclusion months). The pro-ration is calculated down to the day.
You must file a timely return in order to claim the exclusion, and claiming the exclusion means that any tax advantages to income (like IRA contributions) are disallowed to the extent that earned income is excluded. Taking the exclusion also disqualifies you from the earned income credit.
In addition to the foreign earned income exclusion, taxpayers can also claim an exclusion for a foreign housing allowance. Congress has restricted the amount that can be claimed. The limit on the foreign housing exclusion is the following formula:
(30% of your own foreign earned income exclusion – 16% of the greatest possible exclusion)
If you are self-employed, you can deduct any foreign housing costs not already excluded by the earned income exclusion or the housing exclusion.
Amounts your employer gives you for lodging are not taxable, so they also cannot be excluded or deducted from income.
Any exclusion or deduction of housing naturally means that you cannot claim mortgage interest deductions or other tax advantages on that housing. No double benefit is allowed.
One of the biggest changes Congress has made in these rules is the so-called “inclusion amount.” Under the prior law, the income and housing exclusions would be taken off of gross income, and whatever was left would have taxes owed.
Now, the amount of income that is left must be taxed as if the excluded income was never excluded. That means that fairly moderate-income taxpayers will face very high marginal tax rates on fairly low amounts of income.
The details can be found here at: http://www.irs.gov/publications/p54/ch04.html
I hope this helps clarify this issue. It is a WONDERFUL thing…
Sincerely,
Jerry
info@shipcostarica.com is Barry’s address… Barry has been well recommended by people on this list. We are going to use him in November. Good Luck! Where will you live in Costa Rica?
