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Jeff Barton of Punta Pacifica Realty – Best Places In The World To Retire User Account
Trump Ocean Club, Punta Pacifica, Panama City, Panama – Best Places In The World To Retire – International LivingIn Panama, or in in any other country in the world, if you’re a US citizen you still have to file for US taxes.
 
One benefit of living abroad is what is called the Foreign Earned Income Exclusion.  The amount of the exclusion gets higher based on inflation and is roughly $100,000 now.  By living abroad for more than 330 days a year, you are eligible to exclude the current specified amount of earned income (not passive income) paid to you abroad for income earned outside of the US.  
 
(Trump Ocean Club, Punta Pacifica, Panama City, Panama, pictured.)
Michael A. Martinez of B & B Real Estate Nicaragua / Panama Real Estate Information – Best Places In The World To Retire User Account
Tropical Radio Telegraph Company receipt 1944 with Panama revenue stamp – Best Places In The World To Retire – International LivingYou have to file US taxes anywhere, but the great thing about living in Panama is if you are working here in Panama, and you do not spend more than 14 days back in the United States, there is an exemption of I believe up to US $101,000 upon which you do not have to pay ordinary income tax in the US.
 
(Tropical Radio Telegraph Company receipt in 1944, a radiogram to call Minnesota with a Panama revenue stamp, pictured.)
Frank Kehanu – Best Places In The World To Retire User Account
Dear Newcomer,
 
Welcome to The Isthmus !!!
I.A.W. IRS Publication 54 / Section 4.   Foreign Earned Income Exclusion
                                           Limit on Excludable Amount
 ​Limit on Excludable Amount
 

You may be able to exclude up to $99,200 of your foreign earned income in 2014.

You cannot exclude more than the smaller of:

  • $99,200, or

  • Your foreign earned income (discussed earlier) for the tax year minus your foreign housing exclusion (discussed later).

If both you and your spouse work abroad and each of you meets either the bona fide residence test or the physical presence test, you can each choose the foreign earned income exclusion. You do not both need to meet the same test. Together, you and your spouse can exclude as much as $198,400.

In layman's language, if you make more than the above mention figure, you have to pay taxes on the amount that surpasses the excludable AMT.

If are right or under the excludable AMT, all you do is file w/ithout a return. 

 

 

Penny Barrett of Fundacion Bid 4 Bouquete – Best Places In The World To Retire User Account
Your obligation to pay Uncle Sam extends to wherever you are in the world. Expats who are retired and live in Panama owe no income tax to Panama unless they work here. Panama does not tax income earned in a foreign country such as interest, social security, dividends, etc earned in your home country.
 
The foreign tax credit and the income exclusion apply only to people living and working in Panama.
 
Most of us retired folks continue to file U.S. tax returns and report our Panama bank interest on it.
Roy Cannon of Gestoria Cocle - main office in Penoneme – Best Places In The World To Retire User Account
If you live in Panama it is recommended that your file a US tax return, if you are an American citizen or have a green card, even if you owe nothing, or have no income - once accepted, the return has a shorter period in which that tax year can be investigated by the IRS than if no return was made. 
 
Only "earned income" (wages or self-employment income) is exempt, under certain conditions, from US taxation; dividends, interest, income from rental properties are taxable, even if you never return to the US...as long as you retain your nationality.  You may have a US Social Security obligation if you are not paying Social Security in Panama.  You need professional advice if you have any income from personal work.
 
In some cases taxes paid in Panama can produce a credit that can be taken on your annual US tax return.  Again, take professional advice.
 
If you are resident outside of the USA in April, your personal annual tax return filing date is automatically extended.
 

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