MyExpatTaxes review: What U.S. citizens living abroad forget (2024)

FAQs

Do US citizens living abroad need to file taxes? ›

If you are a U.S. citizen or resident living or traveling outside the United States, you generally are required to file income tax returns, estate tax returns, and gift tax returns and pay estimated tax in the same way as those residing in the United States.

As its name suggests, the expat tax penalty amnesty program grants tax payers a pardon for not having filed the previous taxes as long as they can certify that their non-compliance wasn't willful. U.S. expats who do not owe any tax to the U.S. will not be subject to the failure to file and failure to pay penalties.

The US is one of the few countries that taxes its citizens on their worldwide income, regardless of where they live or earn their income. This means that American expats are potentially subject to double taxation – once by the country where they earn their income, and again by the United States. NOTE!

The capital gains tax applies to profits made from the sale of investments, including properties, and is applicable to Americans residing abroad as per US tax laws. These tax rates are lower than ordinary tax rates.

Yes, if you are a U.S. citizen or a resident alien living outside the United States, your worldwide income is subject to U.S. income tax, regardless of where you live. However, you may qualify for certain foreign earned income exclusions and/or foreign income tax credits.

In the US tax system, foreign income is taxed at the same marginal rate as any income earned inside the country.

Generally, to meet the physical presence test, you must be physically present in a foreign country or countries for at least 330 full days during a 12-month period including some part of the year at issue. You can count days you spent abroad for any reason, so long as your tax home is in a foreign country.

However, you may qualify to exclude your foreign earnings from income up to an amount that is adjusted annually for inflation ($107,600 for 2020, $108,700 for 2021, $112,000 for 2022, and $120,000 for 2023). In addition, you can exclude or deduct certain foreign housing amounts.

Some U.S. citizens and residents living abroad must file a state tax form, but not all expats are required to do so. What U.S. expats do for state taxes depends on which state they lived in before their move to another country.

The Foreign Earned Income Exclusion – The FEIE is the most common and broadest aid to prevent double-taxation. You qualify if you live and work overseas and pass either the Bona Fide Residency test or the Physical Presence Test. If you qualify, you can exclude up to $112,000 for tax year 2022, and $120,000 for 2023.

Why are US citizens double taxed? ›

The US is one of the only countries in the world that taxes citizens regardless of where they live and work. Because of this, when a US citizen moves to another country with an income tax, they will have to report their income to both governments and face double taxation. This applies to “accidental Americans” as well.

For individuals who are dual citizens of the U.S. and another country, the U.S. imposes taxes on its citizens for income earned anywhere in the world. 7 If you live in your country of dual residence that is not the U.S., you may owe taxes both to the U.S. government and to the country where the income was earned.

U.S. citizens living abroad, often referred to as expatriates or expats, are generally required to file U.S. income tax returns, just like individuals living in the United States. However, the tax obligations for expats can be different and more complex due to their international status.

For tax year 2024, the maximum exclusion is $126,500 per person. If two individuals are married, and both work abroad and meet either the bona fide residence test or the physical presence test, each one can choose the foreign earned income exclusion.

If you meet the applicable reporting threshold, you must report all of your specified foreign financial assets, including the specified foreign financial assets that have a de minimis maximum value during the tax year. For exceptions to reporting, see Exceptions to Reporting in the instructions for Form 8938.

When United States citizens sell foreign real estate, they may have to pay a capital gains tax. The capital gains tax is applied to all United States citizens' capital gains, regardless of where the gain is made and whether capital gains taxes are levied on these profits in other countries.

You can travel abroad for as long as you'd like without any risk of losing your U.S. citizenship. And if you plan to stay outside of the United States for longer than a year, you won't need a re-entry permit in order to return, as is the case for green card holders (permanent residents).

Federal law requires U.S. citizens and resident aliens to report their worldwide income, including income from foreign trusts and foreign bank and other financial accounts.

Tax insight: tax deadlines for expats in 2024. Americans living abroad still have to pay any tax they owe by Monday, April 15 in 2024, however, most expats won't owe any US tax once they file. The filing deadline for expats is actually 2 months later, June 17, to give you time to file your foreign taxes first.