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It can be tricky to build wealth from abroad as an American, but there are a few tricks that might work. Whether you are living or working in another country, finances can be challenging to navigate. But from using US-based investments to real estate, here are some tips.
Understand Your Tax Position
One of the most useful tools you have as an American overseas is US tax exclusions and credits. Many expats find this useful for wealth building, but it relies on a careful understanding of your tax position. You can use an online service to learn how to file US taxes while living overseas. You might also qualify for the Foreign Earned Income Exclusion (FEIE), which allows you to omit a large portion of income, and there are also foreign tax credits you can claim.
Stick to US-Based Investments
To keep things as simple as possible, it is recommended that you stick to US-based investments. This keeps your finances and taxes as simple as possible. This includes mutual funds and ETFs through US-friendly brokerages. However, you should avoid passive foreign investment companies (PFICs) as you will have to file strict and complex reports. It is also a good idea to stick to a US-based retirement account that will benefit from US tax exemptions.
Build Wealth from Abroad from the Right Location
As of the 2022 census, there are around 4.4 million American expats living in other countries. There are many challenges when relocating abroad as a family, and the location itself has a lot to do with it. However, you can live in a place with a low cost of living compared to the US while maintaining a US-level remote income. There are also low or no-income tax countries such as the UAE and Dubai. And you can hedge your money by using offshore banking accounts.
Make Multiple Real Estate Investments
Real estate is generally considered one of the best sectors for safe investment. Of course, all investments are subject to risk, but investments such as real estate investment trusts (REITs) offer long-term gains without the hands-on complexity. However, buying local property in the country you are living in can be a solid way to earn passive income, such as rentals. You can also simplify your real estate tax situation by holding on to real estate located in the United States.
Build a Remote Career
Remote careers are changing how people live, earn, and work. The web now makes it easier to build a remote business that you can manage from anywhere in the world, known as digital entrepreneurship. This is economic as you can earn a high income while living in a low-cost country. You can also secure high US wages for contracts regardless of where you are living. However, you might also benefit from the low cost of operation with a business in another nation.
Summary
Understanding your tax position will help you build wealth abroad as an American. However, it all depends on the location in comparison to income and taxes. But you can build an online career or business while receiving high US payments in comparison to a low-cost living situation.