My wife and I had dinner last night at a small Asian-fusion restaurant here in San Miguel de Allende, Mexico with two lawyer friends visiting from the United States. One sat down and immediately began our evening’s conversation with a story.
“You won’t believe this,” he said, holding up his thumb, grinning ear to ear.
“I was chopping vegetables the other night and I sliced my thumb right here.” I could see the scar.
“I am sorry to hear that,” I offered, “but you seem absolutely cheerful about it.”
He continued. “It bled profusely and we ended up going to the emergency room.” His excitement was palpable.
“And, you won’t believe this, I was seen by a doctor in about two minutes. In the US where I live, I might have sat in the ER for 3 or 4 hours. The doctor sewed me up, told me he wanted to see me again in a couple of days. And then do you know what happened?”
“You discovered a winning lottery ticket in your pocket?” I joked.
“Almost as good,” he laughed. “I got the bill. $35 dollars!”
Having lived in Mexico 10 years, that sounded about right to me.
“Don’t you get it? Thirty-five dollars,” he pronounced the words slowly as If I did not understand him the first time. “In the U.S. that would have been $500, maybe $1000, or more!”
Such is the reaction of many who experience medicine outside the US sickcare system, the most expensive in the world.
THE “CURE” IS WORSE THAN THE DISEASE
And now, with ObamaCare, misnamed the Patient Protection and Affordable Care Act, all Americans, or almost all, are going to have the privilege of paying for that expensive care through the mandatory purchase of insurance which government deems “minimum essential coverage” and if they (you) don’t buy it, you will get hammered with a stiff penalty which the US Supreme Court has decided is actually a tax– a tax on not buying something the government wanted you to purchase.
With no free market or competition built into the system, the American taxpayer is about to be bent over and gang-screwed again. The only difference is that everyone, or almost everyone, is going to get this shaft, including many Americans who live outside the United States.
Let’s begin with the statute itself, Section 1501, which appears to be a collection of English words that have no relation to one another:
‘‘(4) INDIVIDUALS RESIDING OUTSIDE UNITED STATES OR RESIDENTS OF TERRITORIES.– Any applicable individual shall be treated as having minimum essential coverage for any month–
‘‘(A) if such month occurs during any period described in subparagraph (A) or (B) of section 911(d)(1) which is applicable to the individual, or
‘‘(B) if such individual is a bona fide resident of any possession of the United States (as determined under section 937(a)) for such month.
Section 911(d)(1) is part of the Internal Revenue Code and provides:
“(d) Definitions and special rules
For purposes of this section–
(1) Qualified individual
The term “qualified individual” means an individual whose tax home is in a foreign country and who is–
(A) a citizen of the United States and establishes to the satisfaction of the Secretary that he has been a bona fide resident of a foreign country or countries for an uninterrupted period which includes an entire taxable year, or
(B) a citizen or resident of the United States and who, during any period of 12 consecutive months, is present in a foreign country or countries during at least 330 full days in such period.”
So, you are probably asking, “What does this mean in English?” At best, it is difficult to explain, but here goes:
Whether the individual mandate to purchase health insurance and the penalties for not purchasing it will depend on whether the expatriate is either:
1) Eligible for the IRS’s foreign earned income exclusion, which means the expatriate must have a tax home (the general area of your main place of business or employment where you happen to be permanently or indefinitely engaged) in a foreign country, as well as be either a legitimate resident in that country, or
2) spend at least 330 days a year outside the United States.
Still not clear? I thought not. Let’s try again.
If you live outside the US but return to the US more than 35 days in any year, you will be mandated to purchase qualified health insurance coverage or pay the tax unless you can prove you qualify for the foreign earned income exclusion.
The foreign earned income exclusion may be available to you if you meet the bona fide resident test (which means in general terms that you’ve lived in a foreign country for over a year, made it your home, and pay taxes there.) More on this in a minute.
Just know that if you are able to spend less than 35 days a year in the US, your life will be better, or at least easier as far as ObamaCare is concerned. The physical presence test is reasonably simple to calculate– you either spent 330 full days outside the US in a tax year or you didn’t. The calculation is explained by the IRS here.
The problem is that many American expats visit family, friends, and return to do a little business from time to time that keeps them in the US for more than 35 days in a given year, which leaves only the bona fide residence as a way out of ObamaCare, and that test is more difficult. The IRS has an explanation of it here and I hope you find more helpful than I did.
What the IRS does make clear is that the determination of whether you are a bona fide resident of a foreign country will be made based on your answers on IRS Form 2555 which can be found here.
The questions asked on Form 2555 include: whether you buy or rent your residence in the country in which you live, whether you have told the government in the country in which you live that you are not a resident of that country, whether your family lives with you full or part time abroad, and whether you are required to pay income taxes in the country in which you live.
Disturbingly, the effect of your answers to all of these questions is not made clear on Form 2555, except for this bright line test: if you have told the government of the country in which you live that you are not a resident of that country and (for that reason) claim you are not required to pay income tax in that country, welcome to ObamaCare. In such a case, the IRS will deem you having not met the bona fide residence test.
While all expats must wait to see how this plays out, my guess (only a guess at this point) is that you may dodge the ObamaCare bullet if:
1) You live out of the country and don’t return to the U.S. more than 35 days in any year, or
2) You live out of the country, have declared to the country in which you live that you are a “resident” of that country, and you pay income taxes in that country as required by their tax laws which, of course, differ by country. (In Mexico, for example, that would arguably mean holding an FM-2 visa stamped “resident,” or having “immigrant” status, and filing a Mexican income tax return for any income Mexico requires residents to report.)
On the other hand, if you fall into one of the following categories which many U.S. expats will, my guess is you will find the IRS wanting you to pay the ObamaCare tax if you fail to purchase US health insurance that meets minimum government requirements:
1) You live out of the country and spend more than 35 days a year in the U.S. and are not considered a “resident” by the country in which you live and do not pay income taxes in that country as required of residents, or
2) You live out of the country pursuant to a non-resident visa, e.g., an FM-3 “non-resident” visa in Mexico, and you do not pay income tax in the country where you live because you are not, or claim not to be, a resident there.
Of course, I could be wrong. It remains early in the game. The individual mandate of ObamaCare does not take effect until January 1, 2014, which is also when the tax for failing to have mandated insurance goes into effect. That tax includes an annual penalty of $95, or up to 1% of income, whichever is greater, on individuals who are not covered by an acceptable insurance policy; this will rise to a minimum of $695 ($2,085 for families), or 2.5% of income, by 2016. (Any US citizen who lives outside the US should consult with their tax attorney or tax advisor to determine whether they must buy US health insurance or pay the tax.)
What I do know is that ObamaCare is an in-your-face Statist move, funding 16,000+ new IRS agents to make sure everyone complies or else, and that it will be another reason many US citizens living abroad will seriously consider expatriation. One other avoidance technique I failed to mention is to get yourself tossed into a US prison, easy to get done these days. Seems prisoners are provided healthcare and won’t be required to duplicate the coverage they already have. As you can see, some US expats won’t be so lucky.
Many other questions remain, to include whether cross-border or international health insurance policies which many expats purchase meet minimum government requirements. And, if an expat is required to purchase insurance, will they receive tax credits to subsidize their purchase of insurance available to some of their onshore brethren? Other topics for other times.
Now, take a deep breath. Remove the pistol from your mouth. Check your blood pressure and before writing hate mail, remember that I did not write this law, but rather, that I am just a humble decipherer of the Klingon.
Go in peace, or flee. Your choice.
Jim Karger is a lawyer who has represented American businesses against incursions by government and labor unions for 30 years. In 2001, he left Dallas and moved to San Miguel de Allende in the high desert of central Mexico where he sought and found a freer and simpler life for he and his wife, Kelly, and their 10 dogs. Karger's website is http://www.crediblyconnect.com.
Pingback: Expat, Meet Obamacare « Evil of indifference
OK 16,000 new IRS agents making at least 60K per year with fringe included (probably more) brings us in at just under a billion dollars. But I am sure that we are not raising taxes any to cover these additional annual expenses just to ensure that I am insured…
Pingback: American • Expat, Meet Obamacare « lessbull.com
The problem is this doesn’t explain the WHY the ER visit takes to long. The why influences the cost problem and a lot of the other problems with our health care system.
Because of the way the feds pay for the uninsured now (yes virginia, the federal government pays for the uninsured pre obamacare) at the ER incentivies hospitals to drive up costs
A year or two ago, I was visiting a big Mid-West city to deliver some lectures to psychiatrists at their biggest hospital and was taken on a tour of the psychiatric service. It was like stepping back into the 19th century, a ghastly, dehumanizing travesty of my profession. By way of small talk, I mentioned it must be costing them at least $1000 every time a patient stepped through the door. “$1132, in fact,” said my host, the chief psychiatrist.
“I see room for efficiencies,” I suggested politely. “Based on my experience, I think I could bring it down to about $250 each time.”
“Not here you couldn’t,” he said briskly as he unlocked another steel security door. “Corruption and inefficiency, that’s how this place runs.”
Based on WHO figures, Australia beats the US on most health statistics, some of them not by much but others by a long shot. Based on constant 2000 USD, we spend just over half as much per person in dollars on health as the US. To do this, we spend 8.74% of GDP on health, the US chews through 17.26% of GDP. The Congressional Budget Office estimates that, on present trends, that figure will reach 34% by 2040, by which time the US will be completely broke (the implication being it is only half broke now).
We run a national health service providing top standard univeral care for half the cost of the grossly inequitable and inefficient US health budgets. It would be far cheaper for the US to fly most of its patients to this country for treatment.
It’s all attitude, you see. When it comes to health, our attitude is “Yes, we can.”
Wow! 35 bucks! No wait! I guess Mexico is so great because they have a SINGLE PAYER SYSTEM for people that aren’t rich. I agree, let’s get rid of all the medical insurance companies that we have now and institute Single Payer. Health care in Mexico is provided via public institutions, private entities, or private physicians. Health care delivered through private health care organizations operates entirely on the free-market system, i.e., it is available to those who can afford it. This is also the case of health care obtained from private physicians at their private office or clinic. Public health care delivery, on the other hand, is accomplished via an elaborate provisioning and delivery system put in place by the Mexican Federal Government.
Maybe Medicare for all. What a terrific idea.
Hi there, constantly i used to check web site posts here in the early hours in the morning, for the reason that i enjoy to
gain knowledge of more and more.
Link exchange is nothing else except it is simply placing the other person’s website link on your page at proper place and other person will also do similar in favor of you.
I wonder if there’s some kind of traveler’s insurance which would cover all our bases. I’m in the States now but we’re considering going back out in early 2014…presumably, if and when we travel back to the US to visit family and take care of business, we’d like to have at least emergency coverage. I guess we’ll just be keeping an accountant busy trying to figure out what we should do and what we should have done after the fact…
What’s up friends, nice piece of writing and good urging commented here, I am genuinely enjoying by these.
It is hard to dispute the fact that car shopping is a stressful, anxiety-ridden task for many individuals.
The sheer size of the expenditure involved and the myriad of choices on the market make the need for
education and information quite critical. Fortunately, the tips below can make the process far simpler than you may have believed.
Good day! Do you know if they make any plugins to protect against hackers?
I’m kinda paranoid about losing everything I’ve worked hard on.
There are people who always talk about their really like of genghis grill coupons today.
It may appear easy on Television, but it is function.
This short article can help you to be savvy with genghis grill coupon code
Have you seen these folks at checkout with tons of chick fil
a coupon and wished which you could possibly be saving big like them?
This short article offers the most effective advice for making use of free chick fil a coupons so that you are able to save a ton
in your subsequent buying trip.
Have you seen people in the checkout with tons of mens haircut coupons and
hoped which you could possibly be saving big like them?
This article can give you fantastic suggestions pertaining
to fantastic sams haircut coupons.
What’s up, the whole thing is going well here and ofcourse every one is sharing information, that’s in fact fine, keep up
Are you looking to save your funds on items from groceries to books?
The very best method to get the things you’ll need cheaply is to use famous footwear coupons. Exactly where are you able to look to locate these fantastic famous footwear coupon?This article covers great ways to create use of the very best famous footwear printable coupons.
Coupons are a great way to save some bucks. You might use
them once in a although at a restaurant or the movies. Or you devote some considerable time clipping
friendly’s coupons from several Sunday paper inserts. No matter how involved you might be, the guidelines inside the following write-up can help you raise your game.
I am in fact glad to read this weblog posts which contains tons of useful facts, thanks for providing these kinds of
Hello, Neat post. There’s an issue together with your website in internet explorer, could check this? IE nonetheless is the market leader and a large component to folks will miss your wonderful writing because of this problem.
Spot on with this write-up, I seriously think this website needs
a great deal more attention. I’ll probably be back again to read through more, thanks for the information!
Pingback: Expat, do you need an Obamacare plan?
Pingback: wedding venue Springfield illinois
Pingback: Billy Adamsen
Pingback: controlled goods directorate
Pingback: search engine optimization san antonio
Pingback: My Homepage
Pingback: Opt-in Email List www.optindatalist.com
Pingback: Cigarette electronique
Pingback: bad credit loan
Pingback: car detailing scarborough
Pingback: buy ambien uk
Pingback: Hot new toys
Pingback: shelbyville illinois cooling repair
Pingback: Cape Cod Interior Design
Pingback: Smash Bros U
Pingback: event space nj
Pingback: check here
Pingback: army knives
Pingback: Forex Strategy Master, Forex Strategy Master discount, Forex Strategy Master review, Forex Strategy Master bonus
Pingback: bookmaker free bet offers
Pingback: iq test online
Pingback: Asbestos - Testing
Pingback: Electronic Cigarettes
Pingback: filipina girls
Pingback: Green coffee bean max
Pingback: limestone underfloor heating
Pingback: Westampton NJ
Pingback: Childrens Communion Presents
Pingback: Religious Communion Gifts
Pingback: Insured Sign company
Pingback: BsVdFdynHV BsVdFdynHV
Pingback: Organic Dog Food
Pingback: harper99 caro
Pingback: paintless dent removal training
Pingback: paintless dent repair training california
Pingback: Linux Hosting
Pingback: paintless dent repair training
There’s lots of taxes that you have to pay for not buying something. Not buying a house? Congratulations, you forfeit the mortgage interest tax credit. Not buying an electric vehicle? You forfeit the electric vehicle tax credit. Health care is hardly exceptional in this regard.
The article is pretty wrong on a lot of the details, and unfortunately you’ve got some of the details wrong too. Of course, the whole subject is incredibly complicated to begin with.
There are two ways for an expat to get an ACA exemption. One way is to have a 365-day consecutive period in which at least 330 of those days were spent in full in some foreign country or combination of foreign countries. This criterion is called the physical presence test. It is not enough to be outside the US for 35 days in a one-year span. You must actively be in a foreign country or countries for some combination of 330 full days (so being in international waters, or in outer space, does not count).
The other way to qualify for an ACA exemption is to be a bona fide resident of a foreign country for a full tax year (typically, a full calendar year, January 1 to December 31). Unlike the physical presence test, you can’t pick the 365-day period — it has to be from January 1 to December 31. The “bright line” of declaring yourself as a non-resident to a foreign government disqualifies you from meeting the bona fide residence test, but it does not disqualify you from meeting the physical presence test.
As if that weren’t confusing enough, the ACA also has a separate exemption for anyone who has a single coverage gap of up to three months in a calendar year. For bona fide residents of foreign countries, this exemption is meaningless (your bona fide residence in a foreign country already exempts you from the ACA coverage requirement). For people using the physical presence test, the three-month exemption can be useful, if you happen to have two non-overlapping qualifying periods of 330 out of 365 days, separated by a 90-day period which you spent in the US, or in the middle of the Pacific Ocean, or on the moon, or wherever. In this case you can use the physical presence test to exempt yourself from the ACA coverage requirement for the two 365-day periods, and the three-month coverage gap exemption to exempt yourself for the 90-day gap.
I know, I didn’t make up the rules.
Pingback: שירה בציבור
Pingback: Kosmetik Online Shop - Sonnencreme
Pingback: Pain Management
Pingback: Carpet Cleaning Machines
Pingback: garcinia cambogia side effects reviews
Pingback: Free advertising,
Pingback: click over here
Pingback: keep his heart
Pingback: know his thoughts
Pingback: scott sohr lawsuit
Pingback: zakładanie trawnika
Pingback: Go Here
Since the invention of the "shareholder rights plan" (i.e. the "poison pill"), most companies are relatively immune to hostile takeovers. But according to Dave Gonigam that could all change thanks to one activist investor. And if you're savvy enough, you may just be able to follow his lead for big gains. Read on...
As the markets have continued to rally over the last several years, more and more people have touted the problem of "income inequality" in the US. But as Jim Mosquera explains, this perceived problem will likely sort itself out with the arrival of one specific market event. Read on...
Almost one year ago, substation telephone cables were maliciously cut in San Jose, CA. In 20 minutes, 17 transformers were knocked out. A year on, similar threats have cropped up. Today, Addison Wiggin explains why these threats are so serious for the safety of the global economy... and shows you one way to play it...
The big problem with declaring bubbles is that it really does you no good. Unless you're attempting to measure and time market moves, you're also blowing hot air. But if you keep watch for negative divergences, you have a much better shot at figuring out big market moves than the latest bubble-busters. Greg Guenthner explains...
Too often investments are made in a vacuum. But as Byron King demonstrates, the global economic crash... easy money... and technological advancements are all interdependent. In particular, that connection has changed the investment calculus in the resource market. Read on to learn how...
Oil isn't the only resource to experience "peaks." Due to a major contraction in gold exploration over the past few years, the mining sector is no longer mining gold at its replacement rate. In other words, the amount of gold above ground is running out. And according to Henry Bonner, it will get worse before it gets better...