One of the long-term legacies of the Covid pandemic is forecast to be a widespread transition to remote working. Combined with a pent-up appetite for international travel, this is likely to mean that the next couple of years will bring a surge of interest in working remotely from abroad.
Whether pursuing a dream to live in a particular country or city, or to travel more widely, remote working from abroad is a great opportunity for the new upwardly mobile remote workforce.
Employers are also comfortable managing remote employees now, and have found benefits in reduced business overheads.
In this article we look at some of the main benefits and challenges of working remotely from abroad.
The benefits of working remotely abroad
Americans working remotely abroad can save significant sums of money compared to living in the States.
There are two primary reasons for this: a lower cost of living in many foreign countries, and tax savings.
While Americans working remotely abroad still have to file US taxes on their global income, they can clam a US tax break called the Foreign Earned Income Exclusion by filing Form 2555 alongside Form 1040. Claiming the Foreign Earned Income Exclusion lets them exclude up to $107,600 (in 2020, the 2021 figure is $108,700) of their earned income from US taxation.
“As business leaders consider a more permanent shift to remote work, employees are imagining a bold future with more freedom than they previously thought possible.” – Inc.com
If they are travelling around between countries and so not having to pay foreign income tax in any single foreign country, this means their income (up to the threshold) will be completely income tax-free.
To qualify, Americans have to spend at least 330 days outside the US in a 365 day period, so it means committing to working remotely abroad for at least a year without spending much time back in the States.
Americans working abroad for an American employer, as well as self-employed remote workers, will still have to pay US social security tax though.
Other benefits of working remotely abroad are the opportunity to explore the world, and all the benefits remote working brings in general, such as more control over work-life balance, increased productivity, and a greater sense of freedom.
The challenges of working remotely abroad
Working remotely abroad comes with its challenges too, of course.
Filing US taxes from abroad, and sometimes having to pay foreign taxes too for those who reside in a single country abroad, is challenging, including understanding how to avoid double taxation.
Further bureaucracy such as obtaining residency visas is inevitably challenging too, for those intending to settle in one place.
Personal challenges can also emerge too, in integrating into a new culture, communicating in a foreign language, and missing friends and family back home, as well as practical challenges, such as working for an American employer while residing in a different time zone perhaps.
Seek expat tax advice
Overall, if you have the opportunity to work remotely abroad for a while, don’t pass it up. Experiencing other countries and cultures as an expat is an experience that will broaden your horizons, and one that you’ll never regret of forget.
When it comes to filing US taxes, the US not only taxes globally, but in the age of digital data sharing, it has global reach. Most US-based CPAs aren’t familiar with the intricacies of filing from abroad, so be sure to consult a US expat tax specialist.