Retire where you won’t pay taxes – MD Linx
To paraphrase Ben Franklin, nobody is perhaps more familiar with life’s certainties — death and taxescbwtsyccassdayvzvtqecusccdyvyszad — than doctors. With tax day almost upon us, you, like many other doctors, are likely wishing that taxes were a burden you didn’t have to shoulder. The tax pain is perhaps more acute for physicians nearing retirement.
A quick Google search will show you that there are a number of countries that charge their citizens no income tax. Great, you might think, that’s precisely where I’ll retire. But not so fast: While it’s certainly possible to do this, it isn’t easy.
Moving away from the IRS
Regardless of where they live, all U.S. citizens are legally obligated to pay income tax. That means the only way to avoid paying taxes in the states is to renounce your U.S. citizenship. Even if that’s something you’re comfortable with, the U.S. government has taken steps in recent years to make the process of renouncing your citizenship more difficult.
Now, the U.S. government will hit you with an expatriation tax if you want to leave and set up shop elsewhere. Using this example, let’s say you’re a doctor with a net worth of more than $2 million. You decide to become a citizen of Monaco, because you’re a huge fan of F1 racing and not a huge fan of the IRS. If you sold all of your assets then renounced your citizenships, you’d have to pay capital gains tax on all of it.
Even if you’re comfortable with all of that and are 100 percent set on getting out, tax-free countries still might not take you in. The second half of the tax-free equation requires you to establish citizenship in your new residence. That’s harder in some places than others. No citizenship, and you’re still on Uncle Sam’s payroll in the U.S.
Where to go
Hypothetically, let’s say that you’re OK with paying the expatriation tax and you are fairly certain you’ll be able to obtain citizenship in your new home. Where should you go? Here are four possibilities, starting with the hardest country to obtain citizenship and ending with the easiest.
4. The Bahamas
The Bahamas: The Bahamas landed in the fourth spot because not only is it difficult to become a citizen, but it might not be safe to live there. But if that doesn’t deter you, then why not retire to an island paradise and not pay taxes in the process?
The U.S. State Department lists the Bahamas as being under a travel advisory and also puts crime at the top of its list of safety and security concerns. Residents may be at increased risk for burglaries, armed robberies, and sexual assaults. You may also want to consider the devastation to other islands due to recent natural disasters. The area is ripe for hurricanes.
Obtaining citizenship is a challenge in the Bahamas. To become a Bahamian citizen, you must be a permanent legal resident for 10 years. Other possibilities include being the female spouse of a Bahamian, having been born there after July 9, 1973 to non-Bahamians, or being the child of one Bahamian parent.
Bermuda: Income tax-free Bermuda has many of the same advantages as the Bahamas. As far as safety goes, while hurricanes are still a cause for concern, it actually may be safer, according to the U.S. Department of State.
The main challenge you’ll have to deal with if you choose to live in Bermuda is cost of living. The nation often tops annual lists of most expensive places to live. According to Numbeo, cost of living in Bermuda is almost 96 percent higher than in the U.S. a gallon of milk there will cost you close to $12, a meal at an inexpensive restaurant costs about $33, and a gallon of gas will run you $8.
Bermuda citizens must have a Qualifying Bermudian Connection, which is explained in detail in Section 19 of the country’s immigration code. Applicants must also be a continuous resident for 10 years, and be of “good conduct and character.”