Leaving The Country To Escape Loan Tax Bombs | Student Loan Planner

Are your student loans so bad that you're ready to flee the country to get away from them? I've got some weird news for you. Actually, a lot of our clients have done exactly that. Now, it's a very small number relative to the total that we've made student loan plans for, because we've made plans for well over a thousand people, and we're talking about maybe a couple dozen, that have fled the country. But this is a legitimate strategy, and let me explain why. If you go to another country permanently and live there and work, if you're making less than approximately $100,000, and that money is taxed in that local market, then you can use something called the Foreign Earned Income Tax Exclusion. That Foreign Earned Income Tax Exclusion allows you to eliminate that $100,000 of income or less from your U.S. tax return if you file U.S. taxes. So in a lot of cases, what we've seen is somebody will marry an Australian that they meet, or they will meet somebody in the EU and move over there, and they will relocate their lives there, and they'll start living in a foreign country full-time with the goal of hopefully eventually getting dual citizenship one day with the U.S. in their adopted country. If you're doing that, then if you have a zero AGI legally with the IRS, right, then that income is zero. If your income is zero, then you can use that as proof with your loan servicer to get a payment of $0 a month in your student loan debt. Now, if your plan is to permanently relocate your life over there, then probably you'll have assets mostly denominated in that local currency and that local market as well long-term. Now, if that's you, you have to pay income tax in that forgiven balance in 20 to 25 years. There's a rule in the IRS code called the Insolvency Rule. It basically says if you have assets that are less than your liabilities, when you owe taxes on a forgiven debt, then that tax on that forgiven debt is essentially kind of wiped away. Now, I would not necessarily want you to plan on that, but it's a realistic possibility that somebody with assets all located overseas would be able to keep their U.S. citizenship, basically use that Insolvency Rule when the taxability of their debt happens, and then they would be able to avoid paying anything on that. Also, if they're filing legally with their loan servicer their tax returns in the U.S., filing tax returns, proving a $0 income, and showing that $0 income to the loan servicer, then that's a legal payment of $0 a month that you're doing, and your debt's going to grow and grow and grow. But again, if you're going for loan forgiveness, you're going to have 40% taxes on some huge number that has grown a bunch over a couple decades, which could be way, way less than if you pay this debt back aggressively head-on. Now, this does not work if you have private loans. If you have private loans, they're going to come after you. You're going to have a hard time getting away from that. But if you have only federal U.S. student loan debt, this is one of the most interesting and strange strategies that I've ever seen, and we know that a significant number of people are using it. I would not necessarily suggest that you go run off with an Australian just yet. Make sure that this is something that you want to do long-term. We have had a lot of people call us and ask for a plan because they are overseas. They've been making $0 a month payments, but they want to come back home, and they want to figure out how that impacts their student loan plan. So regardless of if you're thinking about going overseas, maybe with a significant other to get you in there with a long-term visa, or if you're thinking about coming home from overseas after you've been paying very low amounts of your student loan debt, regardless of what path you're trying to take, we can help you with a custom student loan plan if you owe $50,000 to $1 million. That's our specialty zone of expertise. Now, just go to studentloanplanner.com, click on the Contact Us button or the Hire Us page, and just reach out to us. There's all kinds of buttons that you'll be able to get in contact with us. We would love to help you figure this out so that you don't have to stress out anymore. You can get back to doing what you love and live your life, whether that's in the United States or somewhere else. So that's one strange strategy to flee the country to get out of paying your student loan debt, but based on the rules, I believe that it's a legitimate strategy that a lot of people could use, and probably many more people should.