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One of the wildest things I’ve learned living in the Dominican Republic is how generous the tax system becomes when you’re an American living abroad.

Not in a shady way.
Not in an “offshore bank account in the Cayman Islands” way.
Just using the rules the IRS already wrote… and the Dominican Republic already offers.

If you combine these correctly, you can get your total tax bill down to something that barely registers — even on a six-figure income.

This is the type of topic we deep dive in the DR Inner Circle - join now to get our content library, live weekly Q&A and SUPER active WhatsApp chat threads from like minded Dominican expats, retirees and investors.

Let’s break it all down simply, and then we’ll walk through a real example of a married couple earning $200,000.

⚠️ Quick Disclaimer

I am not a CPA, tax attorney, or financial advisor.
I don’t have a CPA I recommend in the U.S. or DR.
This is purely informational — get your own professional to validate everything.

The numbers I share below are ‘best to my knowledge’ and may not be completely accurate .. so again .. lean into what programs are available to you and do some deep dive research on your own situation with a professional.

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PART 1 — The U.S. Tax Breaks Americans Living Abroad Can Use

Believe it or not, the U.S. government actually wants Americans abroad to avoid double taxation.
So they’ve built several tools into the tax code that lower your tax burden dramatically.

Here are the big ones — in plain English.

1. The Foreign Earned Income Exclusion (FEIE)

This is the headliner — the “star quarterback” of expat tax benefits.

Every year, the FEIE amount increases slightly with inflation.
For 2024 it's $126,500, and it generally rises each year.

To qualify for FEIE, you need to pass one of two tests — and only one requires counting days.

Test #1: The Physical Presence Test

This is the simple one.

It’s straightforward, but restrictive.
If you fly back to the U.S. too often, you can break it accidentally.

Test #2: The Bona Fide Residence Test

This one is more “big picture” — it asks whether you’ve genuinely made another country your home.

For example — here’s how my own life fits the test:

• I live full-time in the DR

• My primary home is here

• My kids go to school here

• We’re not planning to move back to the U.S.

• And I don’t need to physically go to the U.S. to earn my income

Because of that, my CPA and I can argue I meet the Bona Fide Residence Test, meaning I'm not handcuffed to the 330-day rule.

If your life is clearly centered abroad, this test is often the better option.

Bottom line:

Either test works.
One is based on days.
One is based on actual life reality.

If you qualify, you can exclude the first ~$126K (and rising each year) of earned income from U.S. taxation.

2. The Foreign Housing Exclusion

The U.S. government knows living abroad isn’t free, so they allow you to exclude certain housing expenses as well.

That includes things like:

• Rent

• Utilities (not phone)

• Some HOA fees

• Security

• Certain maintenance costs

If you’re paying Punta Cana prices — and many of you are — this becomes a meaningful extra deduction on top of FEIE.

3. The Foreign Tax Credit (FTC)

This is the “don’t tax me twice” safeguard.

If you ever do pay income tax to the Dominican Republic, the U.S. will generally give you a dollar-for-dollar credit against your U.S. tax bill.

For many people in the DR, this ends up not being necessary because…

Well, you often don’t pay Dominican income tax at all on U.S. income.

Which brings us to…

PART 2 — A Real Example: Married Couple, $200K Income, Living in DR

Let’s take a scenario that many of you have asked about.

Married filing jointly
Only the husband earns income
Total earned income: $200,000/year
Housing cost in DR: $5,000/month ($60,000/year)
Qualifies for FEIE (Bona Fide or Physical Presence)
Tax year using standard deduction: $31,500 (2025 number)

Let’s run the math.

STEP 1 — FEIE knocks out the first ~$126,500

$200,000
− 126,500
= $73,500 remaining

STEP 2 — Housing Exclusion

With $60,000/year in housing costs, and Punta Cana being a high-cost expat zone, it's realistic to exclude around $30,000 of that.

(This is a common CPA assumption here.)

$73,500
− 30,000
= $43,500 remaining

STEP 3 — Standard Deduction (Married Filing Jointly in 2025: $31,500)

Yes — you still get to take the standard deduction after FEIE and housing.

$43,500
− 31,500
= $12,000 taxable income

STEP 4 — U.S. Federal Tax on $12,000

Taxes on $12K of income?

Basically nothing.
Somewhere around $1,200–$1,500.

No Social Security tax on excluded income.
No Medicare tax on excluded income.
No state income tax if you’ve severed residency.

So on $200,000 earned, you’re paying ~$1,200 total in federal income tax.

That’s it.

This is why Americans who move abroad suddenly look less stressed.

PART 3 — Dominican Republic Taxes (the SIMPLE answer)

Here’s the question everyone asks:

“If I earn U.S. dollars while living in the Dominican Republic… do I owe taxes in the DR?”

Simple answer: Usually no.

The Dominican Republic generally taxes Dominican-sourced income, meaning income you earn because of work done in the DR for a Dominican employer or Dominican business activity.

If you:

• work remotely for a U.S. employer

• run a U.S. business

• earn income from U.S. clients

• have investments based in the U.S.

…then your income is considered foreign-sourced.

And foreign-sourced income is not subject to Dominican income tax for most expats.

So for the $200K earner in our example:

DR income tax owed on U.S. income: $0

The Truth About DR Taxes: Retirees vs. Regular Residents

There’s a lot of confusion online about Dominican tax rules, especially around this idea that “the DR doesn’t tax foreign income.” That’s true in some cases, and not true in others — so here’s the clean and simple version.

Law 171-07 — The 15-Year Tax Holiday (But Only for Retirees)

There is a 15-year tax exemption program in the Dominican Republic, but it applies only to:

• foreign retirees receiving a pension, and

• “rentistas” — people who qualify based on significant passive income from abroad.

If you enter the DR through those categories, the government exempts your foreign passive income (dividends, interest, capital gains, rental income, etc.) for 15 years.

If you’re a regular expat working online for a U.S. company or running your own business remotely, this law does not apply to you.

Regular Residents (Most Expats): How It Actually Works

If you move to the DR through the normal residency process, the rules are different — and honestly, much simpler.

Your first 3 years as a resident:

You are taxed only on Dominican-sourced income.

Meaning:

• Your U.S. salary → not taxed by DR

• Your U.S. consulting/business income → not taxed by DR

• Your U.S. rental income → not taxed by DR

• Your U.S. investments → not taxed by DR

Unless you are earning money from Dominican economic activity, the DR does not tax it.

After 3 years:

This is where most people get confused.

After your first three fiscal years in the DR, the government may begin taxing your foreign passive income, including:

• dividends

• interest

• rental income

• capital gains

• royalties

BUT — and this is the part hardly anyone explains correctly:

Your foreign earned income is still NOT taxed by the DR — even after 3 years.

If you work online for U.S. companies or clients, or you run a business that earns money abroad, that income remains foreign-sourced and is not subject to Dominican income tax.

This is true whether you’ve lived here 1 year or 20.

Note:

There are legal ways to avoid the passive-income tax even after the 3-year mark — but speak with a Dominican CPA for guidance specific to your situation.

Oh! And don’t forget about CONFOTUR which, if your real estate purchase qualifies, allows you to waive the 3% transfer tax at sale AND 15 years of property taxes!

PART 4 — Putting All of This Together

For our $200,000/year example:

U.S. tax → ~$1,200–$1,500

DR tax on U.S. income → $0

Total effective tax rate → Well under 1%

All legal.
All straightforward.
All based on systems designed to prevent double taxation and attract foreign residents.

This is why so many Americans and Europeans are quietly moving to the Dominican Republic every year.

And honestly — why wouldn’t they?

⚠️ One More Time: Not Tax Advice

Talk to a CPA.
Talk to a DR tax professional.
This newsletter is just me sharing what I’ve learned living here, making mistakes, and figuring it out.