Do Americans pay taxes on income earned while working in China? This would be on a low 6-figure salary.
Americans have to file taxes until death, regardless of where you earn a living or how much, and regardless of whether you owe any tax or not. In addition, you have to ALSO notify a separate body, FINCEN, (due to the infamous FATCA) each year by June 30 of every non-US account you have, if your aggregate total amount on deposit in any given year exceeds the equivalent of US$ 10k.Although you have to file US taxes AND the FATCA declarations if you have foreign income and accounts, you can lower or even eliminate taxes due to the IRS by one of two mutually-exclusive elective regimes for calculating US tax on foreign earned income:Foreign Earned Income Exclusion - that is an exclusion of taxation on foreign-earned income (salaries, honoraria, consulting fees…) up to an amount prorated by the proportion of the year you are either physically present in a given country or a Bona Fide Resident of that country; it is contingent upon you having to file and pay taxes in the foreign country concerned, provided it has a taxation treaty with the US. If your foreign income exceeds that threshold, you would then owe US taxes on the difference.Foreign Tax Credit. You can also opt to calculate all your worldwide income as if you had earned your living in the US, and then deduct certain taxes that you had paid to the foreign country of residence.In most cases, if you are earning under the Exclusion threshold (prorated up to a maximum of US$101k), the FEIE is the easiest to manage. However, if you are earning over the threshold, it is usually less overall tax (US + Foreign tax) if you elect the “Foreign Tax Credit” since most foreign income taxes are higher than the US• i.e. the amount you pay to a foreign government in tax would exceed what the equivalent US taxes would be on the same income, so the [US tax due]-[Foreign tax paid] is usually 0.Beware of “non earned” foreign income (passive income, social benefits, pensions, foreign alimony, trust fund income, rental income, inheritance etc.). Such income is NOT part of the FEIE regime, and the FTC regime treatment depends entirely upon the tax treaty between the two countries.So, each country has a separate taxation treaty with the US and your circumstances would affect exactly how the taxes are calculated. Consult with a US tax preparer who is versed in current US taxation.