If you are an American citizen living abroad, you are liable for American tax. The citizenship basis of taxation of America makes every citizen susceptible to file their tax returns whether they reside in the country.
Some things expats should know about American taxes for US residents living abroad.
There are chances that the expat will not owe any US taxes.
Suppose you are a US expat living outside America; you are liable to file tax return every year just like any other American unless you fall in the category of the minimum income category.
You will get many exemptions or deductions that can spare you from owning money on your annual tax return. Foreign Earned Income Exclusion allows qualifying Americans living abroad to exclude up to 108.700 dollars of their income earned outside America in their previous year’s tax return. Also, the expats can claim Foreign tax credit – FTC, which allows them to write off income tax paid to other nations. Foreign housing exclusions and international tax treaties are some more expat-friendly tax reductions.
Expats can qualify for a tax refund through Additional child tax credit.
Expats who have children can even qualify for a tax refund. American expats whose children have American social security numbers can claim up to 3000 dollars per child on their previous year tax returns. This applies only to those who have maintained residence in US for more than half the year in 2021. However if you still owe the taxes after claiming the qualifying exclusions and credits, you can use the Child tax credit to minimize the total tax bill.
American expats receive an automatic extension.
The US expats get an automatic extension. The extension is only for filing tax returns and not for paying taxes. The traditional tax deadline of 15th April is automatically extended by two months for Americans outside the country. That means you have until 15th June to file your tax returns. If you need more time, you must file an additional extension request, and you can have until 15th October to file the tax return with IRS. You will still need to pay by regular deadline to avoid interest and penalties if you owe taxes.
Need to file an FBAR
FBAR is a Foreign Bank account report wherein any American with 10,000 dollars or more in overseas accounts at any time throughout the year will need to file. Whether the expats have one account or more, as long as the total sum of those accounts reaches the 10,000 dollar mark, they will need to report all accounts.
Foreign business needs to be reported.
If the expats own a registered foreign corporation or LLC, they are also responsible for reporting those interests.
Wrap up
If you are an American expat and find things complicated, do not fear as the professional expat tax service provider will make things easier for you. a
