I was implying that usually when someone is changing residences from one state to another state to avoid paying state taxes or a reduced tax while living in another country... A lot of times they just do not file any tax return (including the federal level) and that becomes a IRS issue (tax evasion...not filing a tax return for whatever reason). Those that do that is because at that particular time...they are not sure if they will ever return to reside in the U.S. Regardless, a good tax accountant or tax lawyer will be a useful tool for expats especially in today's environment of tax changes in the laws involving residency that's occuring under the Trump administration. wrbtrader
Once a US citizen meets the bona fide residente test OR the physical presence test they can file Form 2555 Foreign Earned Income Exclusion. This helps with Federal Taxes but not Social Security Taxes is my understanding. “The United States taxes citizens and residents on their worldwide income. Citizens and residents living and working outside the U.S. may be entitled to a foreign earned income exclusion that reduces taxable income. For 2019, the maximum exclusion is $105,900 per taxpayer (future years indexed for inflation).” (Source Wikipedia) “Whether working abroad or in the U.S., you must file a U.S. tax return if you meet the filing threshold which is generally equivalent to the standard deduction for your applicable filing status. You may be able to reduce your taxable income to zero by claiming the Foreign Earned Income Exclusion.” (source HRblock) Again Form 2555 does not exempt one from SS tax, at least it used to not. I guess it is still the same.
SOURCE IRS Bona Fide Residence Test To meet this test, you must be one of the following. A U.S. citizen who is a bona fide resident of a foreign country, or countries, for an uninterrupted period that includes an entire tax year (January 1–December 31, if you file a calendar year return), or A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country, or countries, for an uninterrupted period that includes an entire tax year (January 1–December 31, if you file a calendar year return). See Table 3 at IRS.gov/pub/irs-utl/Tax_Treaty_Table_3.pdf for a list of countries with which the United States has an income tax treaty in effect. Whether you are a bona fide resident of a foreign country depends on your intention about the length and nature of your stay. Evidence of your intention may be your words and acts. If these conflict, your acts carry more weight than your words. Generally, if you go to a foreign country for a definite, temporary purpose and return to the United States after you accomplish it, you aren't a bona fide resident of the foreign country. If accomplishing the purpose requires an extended, indefinite stay, and you make your home in the foreign country, you may be a bona fide resident. See Pub. 54 for more information and examples. Line 10. Enter the dates your bona fide residence began and ended. If you are still a bona fide resident, enter "Continues" in the space for the date your bona fide residence ended. Lines 12a and 12b. If you check "Yes" on line 12a, enter the type(s) of family member(s) and the date(s) they lived with you on line 12b. Acceptable entries for family members on line 12b include child, foster child, grandchild, parent, grandparent, brother, sister, aunt, uncle, nephew, niece, son, daughter, spouse, or other. If you check "No" on line 12a, leave line 12b blank or enter "None." Lines 13a and 13b. If you submitted a statement of nonresidence to the authorities of a foreign country in which you earned income and the authorities hold that you aren't subject to their income tax laws by reason of nonresidency in the foreign country, you aren't considered a bona fide resident of that country. If you submitted such a statement and the authorities haven't made an adverse determination of your nonresident status, you aren't considered a bona fide resident of that country. Part III Physical Presence Test To meet this test, you must be a U.S. citizen or resident alien who is physically present in a foreign country, or countries, for at least 330 full days during any period of 12 months in a row. A full day means the 24-hour period that starts at midnight. To figure 330 full days, add all separate periods you were present in a foreign country during the 12-month period shown on line 16. The 330 full days can be interrupted by periods when you are traveling over international waters or are otherwise not in a foreign country. See Pub. 54 for more information and examples. Note. A nonresident alien who, with a U.S. citizen or U.S. resident alien spouse, chooses to be taxed as a resident of the United States can qualify under this test if the time requirements are met. See Pub. 54 for details on how to make this choice. Line 16. The 12-month period on which the physical presence test is based must include 365 days, part of which must be in 2018. The dates may begin or end in a calendar year other than 2018. I suggest studying up on it with IRS. I am not sure what all it excludes but I don’t think it excludes capital gain taxes.