Navigating US and Czech Tax Systems as a US Expat in Prague

As a US citizen living in Prague, you are subject to both *US and Czech tax laws*. While the Czech Republic imposes a flat income tax, the IRS requires you to report worldwide income annually. Understanding how these systems interact and using available tax credits can help you avoid double taxation and minimize your overall tax liability.

Do US Expats in Prague Have to File US Taxes?

Yes. The IRS requires all *US citizens and green card holders* to report 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 pay Czech taxes, you must still file a *US tax return*. However, *tax treaties and foreign tax credits* can help offset US tax obligations.

How the Czech Tax System Affects US Expats

The Czech Republic has a *flat income tax system*, meaning all residents and tax residents pay a fixed rate:

  • 15% flat income tax: Applies to most employees and self-employed individuals.
  • 23% tax rate: Applies to income exceeding approximately **CZK 1.9 million (about $85,000)**.

Self-employed expats may also be subject to **Czech social security and health insurance contributions**.

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US-Czech Tax Treaty: How It Helps Expats

The *US-Czech Tax Treaty*, signed in 1993, helps prevent double taxation by determining which country has taxing rights over certain types of income, including:

  • **Wages & salaries:** Generally taxed in the country where services are performed.
  • **Pension income:** May be taxed in the country where the pension is sourced.
  • **Dividends & royalties:** Subject to reduced withholding tax rates.

While the treaty helps clarify tax responsibilities, it does not exempt expats from **filing a US tax return**.

How to Avoid Double Taxation as an Expat in Prague

To reduce or eliminate double taxation, US expats in Prague can claim:

  • Foreign Earned Income Exclusion (FEIE): Excludes up to *$126,500* (2024) in foreign-earned income.
  • Foreign Tax Credit (FTC): Provides a dollar-for-dollar credit for Czech taxes paid.

We assess whether the *FEIE or FTC* provides the greatest tax savings based on your income and residency status.

FATCA & FBAR Compliance for US Expats in Prague

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

  • FATCA (Form 8938): Required if foreign 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 total foreign bank account balances exceed *$10,000* at any point during the year.

Since many Czech banks report US account holders to the IRS, timely filing is essential to avoid penalties.

What Happens If You Haven’t Filed US Taxes as an Expat in Prague?

If you haven’t filed your US tax returns while living in Prague, you may qualify for the *IRS Streamlined Filing Compliance Procedures*, which allow:

  • 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 on past-due filings to avoid IRS penalties.

Expert US Tax Services for Expats in Prague

US tax laws can be complex, but expert guidance ensures compliance while *minimizing your tax liability*. We specialize in expat tax services, helping Americans in Prague file accurate returns, claim deductions, and reduce taxes owed. Contact us today for personalized tax assistance.

Call Us Today at (305) 815-1462