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Retiring abroad? Beware of foreign tax intrigue

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in Small Business Tax

Q: I'm thinking about retiring early and moving to a foreign country to avoid U.S. income taxes. Will I still be taxed on retirement income from my pension plan and IRAs? J.L.S., Spokane, Wash.

A: Yes, if you choose to remain a U.S. citizen. If you do, the income you earn worldwide is still subject to tax by Uncle Sam. Although U.S. citizens can claim a foreign income exclusion of up to $80,000, that exclusion doesn't apply to retirement income that you earned while you were working in the United States. Tip: Many countries, including the United States, have treaties that protect against double taxation. Consult with your tax adviser when deciding where to relocate, if you choose that option.

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