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I am an American with a permanent visa living and working in Japan.

I am planning on also taking on an American remote job and having the salary go to my American bank account.

Currently, my Japanese income is low enough that I do not have to pay any US taxes (Federal or State).

I already pay taxes to Japan on my income earned here.

How would my US and Japanese taxes be handled in this situation?
Are there any other issues that must be resolved?

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The taxes on your new job would be the same as the taxes on your existing income -- they will be taxed by both the US and Japan. They will be taxed by the US because you are a US citizen. They will be taxed by Japan because you are a tax resident of Japan. (And even if you weren't a tax resident of Japan, I believe it would still be taxable by Japan because it is Japanese income since you performed the work while in Japan.) You can take the Foreign Earned Income Exclusion and/or Foreign Tax Credit on your US tax return to reduce your US tax on the income.

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  • So, using the "Foreign Earned Income Exclusion and/or Foreign Tax Credit" I could reduce my taxes in the US because my US income would be taxed in Japan? Am I understanding this correctly?
    – FieldMouse
    Commented Apr 23, 2023 at 0:12
  • @FieldMouse: Foreign Earned Income Exclusion allows you to exclude the US taxes on the first $110k or so of foreign earned income, regardless of whether it is taxed by another country. It only applies to 12-month periods during which you were outside the US for 330 days, or can show bona fide residence in another country. The Foreign Tax Credit reduces your US tax on foreign income that is also taxed by another country, with the reduction equal to the lesser of the two taxes. You can use FEIE on some income and FTC on some income, or use FTC on all income, whichever is most beneficial.
    – user102008
    Commented Apr 23, 2023 at 1:31
  • Thank you very much!
    – FieldMouse
    Commented Apr 24, 2023 at 3:14

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