Expat Community > Ecuador

silbergleid
Joined 2016
Posts: 6

Income Tax Considerations - US Expat

8 years ago

I will find a good tax person once arriving in Cuenca, but wanted to see if anyone had any thoughts.

Working on resident visas now with my wife for an early-mid 2017 relocation. Here is my situation, as I am wondering if paying US income taxes (not taking the FEIE or FTC) would be better than paying EC income tax, based on the tax rates.
I have a company based in the US, which will pay my US bank, both a distribution (S Corp materially participate) and salary (W2). It will also pay a distribution to my wife as a passive S corp co-owner (considered non-earned income in the US).
I know that EC will "ignore" income if taxes are paid on it in another country, but will tax residents if those taxes are not paid elsewhere, regardless of where earned. I know that if I pay EC income taxes, that I can take the FTC on the amount. I know that social security will need to be paid to both countries (plus Medicare in the US).
Here's what I don't know or am unsure about:
1-Has anyone in a similar position ran their taxes both ways - calculating US and calculating EC to see what produces the smaller tax bill?
2-I am also in a position where I would like to make IRA contributions. I would not be able to do that unless my income is above the FEIE limit as excluded income can not be used for IRAs. Wondering if that matters, or just put money in savings/investments and not even think about IRAs
3-Finally, if I do the FEIE and income is excluded from US income taxes, does EC consider that income as "taxed" since it was reported, even though no actual tax was paid on it.

Thanks folks. And if you have any tax professional recommendations for someone who knows how to deal with these issues, let me know as I'll start to compile a list.

William Russell

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William Russell

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Income Tax Considerations - US Expat

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