Top expat questions

A well-meaning friend recently told me that US expat missionaries and nonprofit workers have basically the same personal finance issues as everyone else. What do you think?

Here is a list of expat warnings and differences I came up with:


  1. How much should I earn? Just enough to live in my host country? As much as my counterpart would be paid in the USA? See Earnings.


  1. How can I save money on credit cards, transferring funds abroad, booking flights, booking hotels, etc.? See Favorite Resources.
  2. Why do I look so wealthy on the Free Application for Federal Student Aid (FAFSA)? Many expats do look wealthy than they are on the FAFSA because they earn more due to a high cost of living, own a property in the US in which they don’t live, earn more to pay for higher education expenses for international schooling, homeschooling, etc. The solution is to communicate your special circumstances to each and every US college. Some will understand and adjust. See “Annotating the family’s special circumstances” in this article.
  3. Is it possible to get a lower price on a college? Yes. Try some of the techniques mentioned here or contact College Assistance Plus.
  4. When I withdraw money from my child’s 529 education account, will it be taxed overseas? Probably. Is there a way to avoid it? See 529 Trick.
  5. Does debt affect my savings? Yes, a lot. Avoid debt (especially on credit cards) and pay off debt (especially on credit cards). You will immediately see a boost in how much you can save and invest. See our articles about Debt.


  1. Isn’t this risky? Buying a piece of a company (investing in stocks) or giving a loan to a company (investing in bonds) carries some inherent risk. Not doing so carries other risks such as not having enough for retirement, not keeping up with inflation, missing out on investing opportunities, etc. See our article “Isn’t investing just gambling?”
  2. How should I get started? Take full advantage of your 403b or similar retirement account. Aim to get to the point where you put in the annual maximum allowed by law. Start with at least $400 per month and increase it by at least $100 per month at the start of each year.
  3. What are the best things for me to start investing in? We’re working on a series of posts about this.


  1. Where is my tax residence? The foreign country in which I live or the USA? Usually, you pay where you live. See “Where’s my income tax residence?”
  2. Have people been prosecuted or fined by a foreign government for not considering their foreign country of residence their tax residence and paying tax there? Yes. See Taxation.
  3. Have people been prosecuted or fined by the US government for not considering the US their tax residence when they live in a foreign country? Not that I know of.
  4. Do I have to file taxes abroad and in the USA? If you are a tax resident of a foreign country, the answer is probably yes. If you do the US return correctly, you’ll probably owe very little. Note that we said you must “file” not necessarily “pay.” See Taxation.
  5. Can the money I contribute pre-tax or tax-deductibly in the US be taxed in my foreign country of residence? Yes, traditional 403bs, HSAs and IRAs very likely will be considered taxable income in your country. You may have to add them back into your W-2 when calculating your foreign tax. See W-2.
  6. Can the money I withdraw from 403bs, Roth 403bs, IRAs, Roth IRAs, HSAs, 529s, etc. be taxed in my foreign country of residence? Yes, it seems likely unless they were specifically excluded in the income tax treaties. See a tax consultant in your host country.
  7. Doesn’t this mean that some of my money will actually be taxed more than once? Yes, it does.
  8. Does my foreign country of residence tax me only on money I earn from sources in that country? No, they usually tax your universal income.
  9. Does my foreign country of residence tax only what I made while I was physically present there? No, they usually tax your universal income unless you actually move to another country.
  10. Does the US only tax me on money earned from US sources or while physically present in the US? No, they usually want you to file based on your universal income. However, if you are paying your taxes in your foreign tax residence, there are many deductions and exclusions.
  11. Does the US tax me on the value or balances of my accounts and assets every year? Generally no. Usually, you are taxed in the USA when the money becomes available to you via interest, dividends, withdrawals, etc. and only on accounts which are taxable or on withdrawals which are not “qualified” (like spending 529 funds on something other than educational expenses). Your balances are generally not taxed, you withdrawals for qualified expenses are generally not taxed and your transactions and gain that stay in a qualified fund are not taxed.
  12. Do foreign countries tax me on the value or balances of my accounts and assets every year? They can. Some countries now have a “wealth tax” which taxes a very small percentage of your total assets in the entire world if you are their tax resident
  13. Are foreign tax rates lower than US tax rates? Well, some countries have very low income tax rates and others very high (as much as 50%). Other taxes include value added tax (sales tax), inheritance tax, gift tax, wealth tax, solidarity tax, health and welfare tax, and so on.
  14. What happens to my social security contributions? If your foreign country has a “totalization” agreement with the USA, there are ways to keep your contributions going into US social security. Generally, those agreements require you to leave your foreign tax residence for a period of 3-12 months every 5 years
  15. Can the home I own in the USA be taxed in a foreign country? Yes, it is possible that it will be taxed as an asset, any income in accrues (e.g., rental income) may be taxed, and the profit from the sale of the home may be taxed.
  16. Can I deduct my US mortgage payments from my foreign taxes? Generally, you cannot.
  17. Can my interest, dividends, capital gains, etc. be taxed in only one country because of the tax treaties? Nope. The tax treaties generally only help with income tax. Other things can be taxed twice.
  18. What do I need to know about capital gains taxes? Let’s say that I buy a $1,000 of Amazon stock and sell it two years later for $3,000. How much will I be taxed on the $2,000 capital gain? Capital gains will generally be taxable in both the US and your country of residence. However, the capital gains tax rate is often not the same as the income tax rate. Similarly, assets held more than x months or y years may be taxed at a lower rate. For example, you generally pay a much lower (even 0%) capital gains rate on assets held for more than 1 year in the USA. Similarly, your foreign tax home may charge a lower rate (even 0%) on assets held for more than 3 years. Selling a stock or stock fund within 1 year may be very costly in both countries, selling it between 1 and 3 years may only cost you abroad, and selling after 3 years could be free of taxes. Sometimes even a day or two makes a huge difference. It is a complicated game but financially well worth playing.
  19. Will I have to pay fees and taxes on services I will never use? Yes. You may have to pay solidarity taxes, health insurance overseas when you already have it from the US, health and welfare taxes where you’ll never receive those benefits, and so on while also paying for the US version of many of these same taxes
  20. Is this all fair? Umm…no, but that’s not really what taxation is all about.

Cross-border Sharing of Financial Information


  1. Are the countries of the world are sharing financial account information like never before? Yes, it is probably in your best interest to assume that your country of residence and the USA are reporting to each other the balances on all of your accounts, any withdrawals on your accounts, and so forth. And some of those transactions which may have been non-taxable in one country can be taxable in another.
  2. Is it true that some foreign financial institutions won’t work with American citizens? Yes. The US requires very exacting reporting on the financial accounts of Americans abroad. Some financial institutions have decided it is easier to not cater to American clients
  3. Is it true that some American financial institutions won’t work with Americans abroad? Yes. This seems to primarily be the case with certain brokerage accounts. It may be wise to keep an American address and to not tell them you moved overseas.
  4. If my US brokerage account is frozen or closed, will I lose my money? That should not be a concern. Some companies will only bar you from making certain transactions (mostly mutual funds) and others will halt all transactions. In any case, it is my understanding (and personal experience) that you have done nothing wrong and will be given ample time to move your funds elsewhere.
  5. Are there some US brokerages that intentionally cater to Americans abroad? Yes. For example, as of this writing, Schwab offers a special Schwab international product that looks promising.
  6. Can I purchase mutual funds in the US while residing overseas? Well, this is interesting. Apparently, it has long been contrary to investing regulations for mutual fund companies and brokerages to sell to anyone living abroad. I’m still looking into this. It doesn’t seem that the buyer has done anything wrong but the mutual fund company (and possibly the broker) have perhaps unintentionally broken some regulations regarding mutual funds and taxation. Stocks and Exchange Traded Funds (ETFs) are perfectly legitimate. There are often ETFs that are similar to, identical to or better than the mutual funds you love and hold.


  1. Can I fund an IRA? Generally no, if you claim the Foreign Earned Income Exclusion (FEIE). See IRA.
  2. In what country, state, city or general area will I live upon retirement? Will I be owning or renting? Will I be in a home, apartment, assisted living, or other? I’m sorry, but I don’t know the answers to these questions for myself or for you. They are big questions and will dramatically change how much you will need upon retirement.
  3. How do I know how much to save for retirement when I don’t know where I’ll be living (see above) or how much my expenses will be? Almost every retirement calculator I’ve ever seen is based on your current income and expenses. Your on-the-field income and expenses will likely be vastly different than your future expenses if you retire to the US. I don’t yet know how to calculate this. I’m working on it.

We’ll be trying to answer or at least think-through many of these issues here on Vagabond Finances.

Did I miss something? Contact me with your questions or solutions!

Mark Mason

Missions is my calling. Finances is my hobby. Helping you is my pleasure. "Mark" is my ultra-ego.