Living Abroad & US Taxes: What Expats Need to Know

As a US citizen or green card holder, living abroad does not exempt you from filing *US taxes*. The IRS requires expats to report worldwide income, but several provisions exist to prevent double taxation and reduce tax liability. Understanding these rules ensures compliance while minimizing your US tax obligations.

Do US Expats Pay Taxes on Foreign Income?

Yes. The *United States uses a citizenship-based taxation system*, meaning all US citizens, no matter where they reside, must report and pay taxes on their *global income* if they meet the following filing thresholds:

  • Single filers: $14,600 or more (2024)
  • Married filing jointly: $29,200 or more (2024)
  • Self-employed individuals: $400 or more

Even if you do not owe US taxes due to *foreign tax credits or exclusions*, you still must file a tax return.

How to Avoid Double Taxation as a US Expat

To prevent double taxation, the IRS offers two primary tax relief mechanisms:

  • Foreign Earned Income Exclusion (FEIE): Allows expats to exclude up to *$126,500* (2024) of foreign-earned income from US taxes.
  • Foreign Tax Credit (FTC): Provides a dollar-for-dollar tax credit for foreign taxes paid.

Choosing between *FEIE and FTC* depends on your income type, foreign tax rate, and eligibility. Our team ensures you select the best option to reduce your tax liability.

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FATCA & FBAR Reporting for Expats

Expats must report foreign financial assets under *FATCA (Foreign Account Tax Compliance Act)* and *FBAR (Foreign Bank Account Report)* regulations:

  • FATCA (Form 8938): Required if your foreign financial assets exceed:
    • $200,000 (single filers) or $400,000 (married filing jointly) at year-end.
    • $300,000 (single) or $600,000 (joint) at any time during the year.
  • FBAR (FinCEN Form 114): Required if your total foreign bank account balances exceed *$10,000* at any point during the year.

Failure to file these forms can result in *hefty penalties*, but our team ensures timely compliance.

What Happens If You Haven’t Filed US Taxes While Living Abroad?

If you haven’t filed your US tax returns as an expat, you may qualify for the *IRS Streamlined Filing Compliance Procedures*, which allows:

  • Filing of *up to 3 years* of overdue tax returns.
  • Submission of *up to 6 years* of overdue FBARs.
  • Potential *waiver of penalties* if non-compliance was unintentional.

We assist expats in catching up with past-due filings to regain compliance without unnecessary penalties.

Do Expats Need to File State Taxes?

Expats may need to file *state tax returns* if their last state of residence requires it. Some states, such as *California and New York*, have stricter tax residency rules, while states like *Florida and Texas* do not impose state income tax.

We assess your situation to determine if state tax filing is necessary.

Expert US Tax Services for Expats

Living abroad brings *unique tax challenges*, but with expert guidance, you can remain compliant and minimize your tax liability. We specialize in expat tax preparation, ensuring accurate filings and optimal savings. Contact us today for personalized tax assistance.

Call Us Today at (305) 815-1462