How to File Taxes as an Expat


It is estimated that approximately 9 million United States citizens or green card holders currently live abroad.

As remote working and non-traditional lifestyles become more and more popular, that number is expected to rise - with the ability to work from virtually anywhere, many Americans are starting to consider moving abroad and exploring other cultures. However, this does have implications when it comes to filing your taxes as an expatriate.

An expatriate is officially defined as someone who is either permanently or temporarily living in a country outside their own. Even if you live in another country, you are required by the IRS to pay taxes based on your worldwide income. Filing taxes as an expat is no simple task, and it can very quickly become confusing to try to understand the laws and regulations that are involved when it comes to filing.

Whether you’ve been living abroad for the past decade or you’re still considering making the jump, this guide will help you navigate the tax filing process as an expat.

1. Find out your taxable income.

Money can be made in a variety of ways - and from a variety of sources.

If you’re living abroad, your taxable income will be determined by your gross income including wages, salaries, bonuses and tips, minus any deductions or exemptions allowed in that tax year. Investment income and unearned income are also included.

Breaking down how much you earn - and from where - is the first step when it comes to filing your taxes. Living abroad, you might find that all of your income is from a foreign source and taxed by the country where you are living. Even so, you must file your taxes with the IRS if you are still a U.S citizen or green card holder.

However, there are a few tax exemptions you can take advantage of.

2. Determine which tax exemptions you are eligible for.

There are two main tax exemptions or credits you can claim if you are an expat: the Foreign Earned Income Exclusion (FEIE) and the Foreign Tax Credit.

The FEIE is based on foreign earned income. You should be able to prove that you were living in a foreign country for 330 of the 365 days of the year, or otherwise meet the bona fide residence test. If you are eligible for the FEIE, you may be able to exclude up to $102,100 of foreign earned income from US taxation.

Individuals who qualify for the FEIE can also claim an exclusion or deduction from their gross income for their housing amount in a foreign country under the Foreign Housing Exclusion or Deduction.

If you are not eligible for the FEIE, you might still qualify for the Foreign Tax Credit. The foreign tax credit can be claimed for foreign taxes imposed on you by a foreign country or U.S possession. This generally only includes income, war profits and excess profits. There are four tests that a foreign tax must pass in order to qualify for the credit:

  1. The tax must be imposed on you.
  2. You must have paid or accrued the tax.
  3. The tax must be the legal and actual foreign tax liability.
  4. The tax must be an income tax (or tax in lieu of an income tax).

3. File your taxes!

Once you’ve figured out how much of your income is taxable by the IRS, it’s time to file! You can either choose to do this individually by mailing in your tax return or you can enlist the help of a Certified Public Accountant (CPA) to file your tax return for you.

If you decide to file on your own, you will have to do all of the math yourself. Though the standard tax deadline is April 15th, U.S citizens and green card holders are automatically granted 2-month tax extensions until June 15th. Keep in mind that any tax you owe to the U.S is still due on April 15th and will accrue interest.

Interested in filing your taxes with a CPA? Taxfyle’s on-demand network of Pros are readily available to help you file your taxes, whether your tax history is simple or complex. Our tax Pros are knowledgeable when it comes to filing as an expat and will find the best tax solution for you.

Sign up today to file your taxes with Taxfyle!

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