When you’re an expat, there are some new tax considerations that come into play. For example, the IRS gives those who live abroad some special considerations when it comes to their taxes. It is important, however, to keep in mind that the IRS has made changes and there are now two different brackets for US expats: one for single and one for married people filing jointly with a spouse who lives abroad. Here, we will explore six vital things you should know about US expats taxes before you file next year!
1. You can still receive many of the same tax benefits as citizens back home
The most obvious benefit is being able to have your worldwide income taxed by just one country, instead of having to pay both countries’ taxes on the same income. If you want additional and more detailed information about this, a simple google search with the phrase “US citizens living abroad taxes” will provide you with everything you need! There are huge benefits that you do not want to miss out on! The IRS gives those who live abroad some special considerations when it comes to their taxes.
2. You still have to file expat taxes or face stiff penalties
It’s common for new US expats, especially those working overseas, to think they don’t have to file their US taxes. However, if you meet the minimum filing requirements for your expat tax status, then just like every other American citizen, you are obligated to file a federal tax return each year through the IRS in order to avoid stiff penalties. No matter where in the world you live and work, as an American citizen it is your responsibility to file your taxes each year.
3. The filing deadline may be earlier
When you’re an expat, there are some new tax considerations that come into play, and one of the biggest is that the filing deadline may be earlier than you think. If you live abroad for at least 330 days out of 365 within a twelve-month period, or you are married filing jointly with a spouse who lives abroad, then your expat taxes are filed according to the same deadline as US citizens back home. This means that if you file an extension for your taxes in the US, then there is no need to do so for taxes filed from outside of the country unless you are leaving them for your tax preparer to complete.
4. You may be able to deduct certain moving expenses
When you’re an expat, there are some new tax considerations that come into play, and one of the biggest is that your moving expenses may now be deductible on your US expat taxes! The main conditions are that the move must be job-related, that your new home must be in a foreign country, and the new job must pay you at least $72,000 annually.
5. You can exclude up to $100,000 of gains on your home sale
When you’re an expat, there are some new tax considerations that come into play, including special rules for selling your primary home. In most cases, as a US citizen living abroad, you can exclude up to $250,000 from your income for selling your primary residence if it has been lived in for at least two of the past five years. If married filing jointly with a spouse who lives abroad, that amount increases to $500,000.
6. You can exclude up to $250,000 of income from a foreign pension with US tax withholding
Withholding taxes for pensions is not mandatory in most cases. However, a few exceptions include if you reside outside of the country where your retirement funds were earned, and you claim benefits from a US-based company or government agency. In these cases, it’s possible to receive credit for the US taxes that were withheld on your retirement fund by completing form 8891.
Now you know six vital things about US expat’s taxes! Keep these tips in mind to help navigate this year’s tax season efficiently and accurately. And remember, even though filing an expat tax return is complicated, it’s always better to make sure you don’t pay more than what you owe, rather than risk owing additional taxes due to poor planning!
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