Taxes

[LINDA ROSEKAIN]

Hi Jason,

the more I read, the more I find out I don’t know. lol If we retire in CR, become residents of CR and our income is from a retirement pension from my husbands U.S. place of employment and our S.S benefits, how are we taxed? Neither income is earned income per sey, do we pay both State and Federal taxes here in the U.S? And what type of taxes do we pay in CR? We want to reduce as much as possible any surprises or things that would make us regret retiring in CR. Thank you again!

Linda

[JASON HOLLAND]

Hi Linda,

First let me advise you to seek the advice of an accountant in the U.S. to be 100% sure on this information. I’m not a tax expert.

As far as federal income taxes, U.S. citizens are obliged to pay tax on any income they make anywhere in the world. I believe that includes Social Security and a pension if your income is above a certain level. You’re on the hook for state income taxes as well if you maintain a residence there, have a driver’s license in that state, that sort of thing. Again, let me recommend you seek the advice of an accountant, as I’m sure there are all sorts of exceptions/special rules that I don’t know about.

As far as taxes in CR, you won’t have to pay anything except property tax if you buy a home. However, if you start a business, you would have to pay  tax on money earned from that business.

[THOMAS MERGENS]

I would also recommend that you speak to a tax attorney familiar with these laws, but here is what I have found out:

1) If you establish residency in a no-tax (or low-tax) state before you move to Costa Rica, you can avoid state income taxes. The key is that you need to be able to show that you moved and physically resided in the low-tax state for a period of time. That’s usually about 6 months. So my plan is to move to Florida (0% state income tax) for 6 months prior to relocating to CR.

2) Depending on your situation, you may be able to avoid US taxes on up to about $95,000 each if you become residents of CR AND spend less than 330 days in the US. This gets very complicated, and in that case I believe you would pay CR taxes, but it is something to look into.

Again, check with your tax attorney on all of this.

[Author]

Posts