US EXPAT TAXES - EVERYTHING YOU NEED TO KNOW (2024)

FAQs

How are US expats taxed? ›

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.

U.S. citizens living abroad typically use Form 1040, the same form used by taxpayers in the United States. However, there are additional forms and schedules that may apply, such as Form 2555 (for claiming the Foreign Earned Income Exclusion) and Form 1116 (for claiming the Foreign Tax Credit).

Most expats are taxed by both the US and the country they reside in, resulting in double taxation.

The United States taxes its citizens and residents on worldwide income, regardless of where they live. This means that a U.S. citizen or resident must file a U.S. income tax return reporting all income, even if the individual lives and works in a foreign country.

The US Exit Tax, or Expatriation Tax, is levied on individuals renouncing their US citizenship or green card. Governed by IRC Section 877A, this tax is specifically designed for high-net-worth individuals. It ensures that their worldwide income and assets are taxed prior to exiting the US tax system.

In general, U.S. social security and Medicare taxes continue to apply to wages for services you perform as an employee outside of the United States if one of the following applies: You are working for an American employer which includes: The U.S. Government or any of its instrumentalities.

As a US citizen living abroad, it's important to understand your filing obligations to remain compliant with the IRS requirements and avoid complications. Failing to file a tax return can lead to penalties and legal repercussions, even if you're living outside the US.

The Foreign Earned Income Exclusion, or FEIE, is also known as Form 2555 by the IRS. This expat benefit allows you to avoid double taxation by excluding up to a certain amount of foreign earned income from your US taxes. In 2024, for the 2023 tax year, you can exclude up to $120,000 of foreign earned income.

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.

To avoid double taxation of US sourced income, expats must pay US tax and then claim foreign tax credits in the country they live in.

How to avoid paying U.S. taxes abroad? ›

As a green card holder or U.S. citizen, you must file a U.S. income tax return while working and living abroad unless you abandon your green card holder status by filing Form I-407, with the U.S. Citizen & Immigration Service, or you renounce your U.S. citizenship under certain circ*mstances described in the ...

One of the main ways an expat can receive a refund from the IRS is by claiming refundable tax credits. Two of the more common refundable tax credits claimed by expats are the child tax credit and earned income credit.

As an American citizen living abroad, you're already at a higher risk of getting audited by the IRS. It benefits expats to learn why that is and how to lower their risk of being audited.

An expat is someone who moves from their native country and settles abroad. American expats must file a federal tax return and possibly pay U.S. taxes if they earn above a minimum income threshold are typically eligible for an automatic 2-month extension to file, but not to pay any owed taxes.

Some American expats who work abroad may also need to pay US Social Security and Medicare taxes on their earned income. For example, self-employed US expats and those who work for a US-based employer must file an expat tax return. For the 2023 tax year, the rate for expat employees is 7.65%.

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.

You might wonder if you'll have any money in the bank after paying both your U.S. and host country income tax liabilities! Fortunately, even though most U.S. citizens working overseas must file taxes, expat tax rules have evolved so most expats don't actually owe any amount at the end of the year.

Some US expats are required to pay state taxes even after moving overseas, depending on the state where the expat has residency. Taxpayers can change or terminate their state residency to erase their state tax obligations. Certain states make it much harder for expats to change their residency status than others.

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.