How to get to ZERO income tax!

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***THREAD***
Section 1: The basics

Income tax is based on income.

Wealth, sales, and ad spend don't attract income tax.

Your income/profit does, BUT not all income is taxable.

So first, if you want to get to ZERO income tax, you need to get to ZERO TAXABLE INCOME.
So how do you get to zero taxable income?

There are two ways:

Only be subject to jurisdictions that do NOT tax income.

OR

Only have income that your jurisdiction does NOT tax.

Let's give two examples of this:
1) There are countries that do not have income tax. If you are ONLY subject to one of those countries tax systems, then make all the income you want.

2) Your country may have income tax, BUT may not tax certain types of income. Load up on that.
Section 2: Who taxes you?

Let's get more advanced.

Every country has rules that determine if you are subject to their taxes.

Let's use a few countries as examples: The US, Canada, the UK, Australia, and Uruguay.
The US

In general, the US is the farthest reaching.

If you are a citizen or resident of the US, if you make money anywhere, the US claims the right to tax it (if taxable income).

You can break residency by moving, but a US citizen is a US citizen no matter where they live.
DON'T PANIC U.S. PEOPLE - THERE ARE WAYS TO NOT PAY US TAX WHILE MAINTAINING US CITIZENSHIP. WE WILL WALK THROUGH THEM.
Canada/UK/Australia

Putting these together because they are similar in who they tax: residents' WORLDWIDE income.

You can break residency of any of these countries, while remaining a citizen, and no longer be taxed by them.

There are other countries with a similar view.
As an example in the UK:

@lawrencekingyo mentions has mentioned several times getting to zero income tax.

He loves the Queen, but 45% of his profits? She was asking too much from Lawrence.

His first step would have been to break UK residency, but could remain a citizen.
So if you live in a country that taxes its residents on worldwide income, breaking residency may be key in getting to ZERO INCOME TAX.

STAY WITH ME. I'M NOT TELLING YOU THAT YOU HAVE TO MOVE TO GET TO ZERO INCOME TAX - IT'S JUST A COMMON WAY TO GET THERE.
So how do you break tax residency in one of these countries?

It's usually straight forward: you move to a new country.

A "move" is subjective, but basically shift the big things in your life to a new country: immediate family, job/business, cars, where you get your mail.
There's also some rules about time you spend in the country you break residency from.

You can usually visit, but not spend a ton of time there. It depends on the country, but can be <180 days a year down to like <46 days a year.

You can visit.
Let's say you are a UK/CAN/AUSTRALIA resident and want to take this path of break residency. What next?

Hold that thought and I'll get back to you.

Let's move back to the US for a min.
Again, you can break residency, but the US is still going to tax you so what are the exceptions?

#1 The Foreign Earned Income Exclusion ("FEIE") - If you move to a foreign country, your first $107k and some of your housing costs can be EXEMPT from US income tax.
If you are under that threshold, then you are in the same boat as people in the UK/CAN/AUSTRALIA
breaking residency even thought you are a US citizen.

While $107k may not sound like much, consider the following.
If you are single making $150k in the US, you are probably paying $55k in tax!

Also $107k USD can buy a MUCH higher standard of living than in some countries than the US.

So if you end up living in a low cost country, making $107k tax-free then you are MUCH better off.
BUT! What if you are above $107k? How do you get to zero?

...but let's say you are a US citizen and you make $300k and you want to get to ZERO!

Honestly, it's tough, but you can get to 4% which is pretty damn close to ZERO from the 50%+ you might be paying.
Section 933 of the US Tax Code literally says that if you are subject to US tax, but are a tax resident of Puerto Rico, the US won't tax your income!

Wha???

Random???

Yeah, it's true.
So what's the 4%?

It's a reduced Puerto Rico tax that PR gives to foreign companies to setup shop in PR and be a service provider to non-PR markets.

4% on business income and 0% on dividends. Again, pretty close to ZERO.

Pretty amazing actually.
So those are the move scenarios if you are a US citizen:

-US FEIE to get to zero US tax if you are under the $107k threshold. Pick up with UK/CAN/AUSTRALIA for
Step 2 (below).

or
Move to Puerto Rico and get to 4% TOTAL income tax if you have a qualifying business.

I'LL VISIT A DIFFERENT PATH IN A MINUTE FOR PEOPLE WHO WANT TO STAY IN THE US!!!

...and get to zero tax.
Step 2 - Back to UK/CAN/AUSTRALIA (and any worldwide resident tax countries).

If you are US and using FEIE, pay attention here, too.

So you've broken residency and are now no longer subject to your country's tax. Again, you can remain a
citizen.
Now what to you do?

Well, now find a country that won't tax you and take residency there.

There are two paths here:
1) Find a country with no income tax like the Bahamas, the Cayman, Monaco (THE LIST IS HUGE IF YOU GO LOW-TAX).

or

2) Find a country that only taxes income earned in the country - TERRITORIAL system - (Uruguay, Costa Rica, Panama, and several others).
ZERO Tax Countries

There are 15. Some might work for you, but some might not.

For many reasons, these aren't always the best options. They also aren't necessary to get to ZERO income tax, as you will see.
TERRITORIAL Tax Countries

These countries tax income you earn in them, but not income you earn in other countries.

Setup residency in one of these and don't make in money IN the country to get to ZERO income tax.

How do I NOT make taxable income IN the territorial country?
Two Ways:

1) It depends on the country, but in general, if you don't perform services for others within the country or sell anything to anyone in the country AND get all your revenue/sales from outside, you should be fine.

Don't make sales in the country you live in.
Next,

2) Free-trade zones.

Some countries utilize areas where if you follow certain rules, there is NO TAX.
Uruguay is a great example. It has multiple free-trade zones. Right, @lawrencekingyo?
Step 3

First, quick review Steps 1 and 2:

You have broken residency in your home country so you no longer have tax there.

You have setup residency in a no tax/territorial country. If territorial, you aren't creating taxable income in the country.
Step 3 is don't create taxable income anywhere else.

Avoid Residency and Permanent Establishment in other countries (other than country of residency).

Avoid tax in non-resident countries by NOT doing the following:
1) Don't create residency in another country.

In general, don't stay more than 183 days in a year.

2) Don't get a job, have a office, or employees in another country.

You can visit other countries and make internet sales to residents. You can also generally, have contractors.
In Summary - How to MOVE for ZERO income tax

1) Break residency from your home country,

2) Setup residency in a no or territorial taxed country AND don't have taxable income there), and

3) Don't create a business or stay >183 in other countries.

= ZERO INCOME TAX!
Section 2 - Getting to ZERO Income Tax, while staying in your country

What if you want to stay in your country?

Remember in the beginning when I talked about taxable income?

ZERO income tax is more challenging if you don't move, but the key is to minimize taxable income.
Let's start with the US.

You want to reduce your taxable income, but you still want income.

Certain income in the US is exempt from tax.

Make all this you want and get to ZERO INCOME TAX.
Examples of tax-free income in the US:

Real estate gain exclusion. Buy a house, move in, fix it, flip it, and pay no tax on the gain.

Municipal Bond interest - tax free.

Loan proceeds from whole life insurance - see @ChroniclesNate

Qualified ROTH IRA or 401(k) distributions.
If you can get your income portfolio to the above - then you can get to ZERO income tax while still living in the US.

Other than tax-free income, another way is using various deferral options. These are especially good in year when you make much more income than usual.
There are a lot of things you can contribute you that defer taxes:
401k, IRA, HSA, etc...

but even bigger ones like a Solo 401k on your business that you can contribute $57k to and pay no income tax this year.
In fact, if you have multiple businesses, you could potentially defer $57k of tax for each and even contribute more to a pension plan - potentially deferring $150k of income. @WCInvestor has some great stuff here.
The catch in using deferral is most of us need money to live on. Unless that comes from tax exempt sources, in general whatever isn't deferred is taxed.

Note that while it is harder to get to ZERO in your home country, e.g., the US, you can still HUGELY lower your income tax.
If you use deferral, you do eventually get taxed.

For this reason, I'm a big fan of paying tax now and using tax advantaged vehicles for getting to zero tax later - like ROTHs or Whole Life Insurance.
In other countries, the same applies above as in the US:

If you are in a country with tax and you don't want to move to have ZERO tax, you have to find sources of income that are not taxed in your country or you have to find tax-advantaged vehicles/wrappers to defer your tax.
This is a lot of information.

Don't try to take it in all at once. Print it out, think it through, ask me questions, ask your tax person questions; and use the principles to lower your tax...all the way to ZERO if it works for you!
You've seen the US as an example of a country that taxes citizens everywhere, but with key exceptions to move and get to zero income tax.

You've seen the US to show how you don't have to move and can use exempt income/deferral to get to zero tax.
You've seen UK/CANADA/AUSTRALIA as examples of countries that only tax residents and how to move to get to zero income tax.

They also have exempt income and deferral strategies if you don't want to move.
I hope in all of this you have been inspired.

You have now seen that zero income tax is possible.

You have seen that substantially lowering your tax is possible - with a little proper planning, you can pay MUCH LESS TAX than you are paying now.
This was a lot of work for me.

It was a lot for you to read.

There is no one you know that this thread would not benefit.

My DMs are always open to all.

LET'S LIKE AND RT THIS ALL OVER THE WORLD SO EVERYONE CAN PAY LESS TAX!!!
This thread has hugely beneficial tax-saving ideas for anyone.

I have written 60 other threads with similar tax saving benefits (will mostly benefit someone with US income).

You can buy all 60 today and save $1,000s of tax.

Buy TODAY before the price goes up again!

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22 Jan
If you have REAL ESTATE investments, you are likely MISSING this tax savings.

ELEVATE YOUR CAP RATE via this tax loophole!

Everyone likes the tax benefits of real estate, but few talk about this huge one that is more relevant NOW than EVER.

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All that means is if you buy a $1M property, you don’t get a $1M deduction the year you buy. You take it over 27.5 or 39 years depending on property type.
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Tax Loophole Alert!

Here's how to pay ZERO tax on your real estate flips!

This is a great one!

Are you handy? Do you like interior design? Have you considered flipping residential real estate?

***Thread***
2) Buy your house to flip.

Move in. Literally.

Make repairs and upgrades. Do whatever you do when you flip a house.

Stay exactly two years (or more).

Sell for a huge gain.

Pay $0 tax on the gain!

Repeat every two years.

It's called the home sale exclusion.
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Insane!

Q: How many times can I do this?

A: Once every two years. No lifetime limit.
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deductions for YOU,

on an amount less than a nice bar tab...

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There are a few things you can employ your child to do.

On easy example is being a "model" in your business marketing materials (e.g. pics for advertising).
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So many of us did.

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- The principal place of your business.

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Open a spreadsheet.

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