Has it been a good year? I hope 2018 has been a great one for your business and travels, for those of you already enjoying a location independent lifestyle. For those of you yet to take the plunge, I hope you’re that bit closer to making your dreams a reality. Who knows, maybe 2019 will be the year you’ll look back on as the year you made the best decision of your life!
*To learn more about the tax implications of becoming a digital nomad, check out my course on Teachable! It’s the only online course that covers the basics of becoming a digital nomad, and becoming self-employed, all in one place. It could be the best Christmas present you ever gave yourself!
As the year draws to a close, it’s a good time to do a quick check-in on your finances. There are a number of areas in your expat/digital nomad personal finances that are best addressed before the ball drops on New Year’s Eve. Setting aside an hour or so to do this vital health-check will put your mind at ease and ensure you’re ready for tax time. Then you can devote the rest of the year to strategic planning for next year, and hopefully celebrating a great year!
Read on for your year-end digital nomad tax checklist:
1. Check your travel
If you plan on claiming the Foreign Earned Income Exclusion via the Physical Presence Test, check in with your travel for the year to date. As you (hopefully!) know, you need to spend 330 days in a foreign country, in a 12 month period. The last quarter of the year is a good time to check in and ensure you’ll meet that, particularly if the holiday season finds you making a visit back to the US. A few extra days here and there can end up costing you if it means you won’t qualify for the FEIE. Make sure that trip home doesn’t end up being much more expensive than you intended!
2. Review your income streams
Q4 is also a good time to ensure your basic bookkeeping is in order. Essentially you want to know if your revenue projections at the beginning of the year are still in line. If you’re absolutely killing it in your location independent business, take time at the end of the year to celebrate your success, as well as ensure your budget for tax time is still accurate.
3. Make decisions about year-end expenses
Now that you’re diving into your P&L statement, it might be a good time to accelerate some expenses if you’d like them to offset current-year income. Are there purchases for your business that you can make in December instead of January? And have you accounted for all of your business expenses to date?
4. Consider making a retirement contribution
Depending on your employment situation, you may be eligible to make a contribution to one of the various tax-advantaged retirement accounts (such as an IRA, SEP-IRA, 401k, or Solo 401k, etc). Some of these can be done when you file your taxes, such as IRA contributions, but 401k contributions need to be done by Dec. 31. While you’re doing a deep dive into your year-end finances, it’s a great time to decide how much and when to contribute. If you’re not sure exactly what you’re eligible for, well that’s a perfect topic to include in the next checklist item…
5. Check in with your friendly neighbourhood* expat tax professional
If you’ve made major money moves in the past year, it might be a good time to check in with your very own expat tax pro to ensure you’re well set up for tax time. And if you’d like to speak with me, I’d suggest doing so soon, as my hourly rates will be going up for new clients in 2019! Book a consultation here and let’s have a chat before the holiday season craziness kicks off:
https://gracefullyexpat.as.me/
*Well, I might not be in your neighbourhood as such, but I’m in someone’s neighbourhood! I’m in Dublin now for the rest of 2018, and then in early 2019 I’ll be heading to Chiang Mai for Nomad Summit, will I see any of you there?
As digital nomads, we have so much to be thankful for. We have so much freedom over how we live and how we earn a living. For me, the end of the year is the perfect time to reflect on the year so far, and to look ahead to goals for the next year.
Every year I live this lifestyle just keeps getting better and I’m so grateful to be a part of this community, and to be helping others in the community as well. It’s so rewarding to help people take one potentially confusing and stressful area, namely their taxes, and make it clearer and leave them feeling empowered. I wish you clarity and empowerment on your digital nomad journey, now, and into 2019!
