What do I need to know about the US taxes for expats?
US citizens living abroad are subject to US tax laws and must know how to navigate filing requirements, deadlines, tax benefits, and double taxation.
Summary
American expats are subject to US tax laws on their worldwide income, regardless of where they live.
US tax returns for expats are generally due on June 15th, with the possibility of extensions.
The US has tax treaties with over 60 countries that set clear guidelines for international income.
Unbiased can match you with a financial advisor who can help you navigate the complex world of expat taxes and ensure you’re adhering to all of your legal requirements.
How do US taxes work for expats?
Even when living abroad, US citizens and Green Card holders are still subject to US taxes for expats.
This means that they generally need to file a US federal income tax return every year reporting their worldwide income, regardless of where they live.
However, there are several provisions designed to prevent double taxation.
Foreign tax credit (FTC): Expats can claim credit for foreign taxes paid with the same income.
Foreign earned income exclusion (FEIE): This allows qualified expats to exclude a certain amount of foreign-earned income from US taxation.
Foreign housing exclusion: This allows expats to deduct or exclude certain housing expenses incurred while living abroad.
Tax treaties: The US has tax treaties with many countries to prevent double taxation and provide other tax benefits.
American expats typically also have tax obligations in their country of residence. Each country has its own tax laws and rates, so the specific tax burden will depend on the individual's circumstances.
Get expert help with your taxes
Expat taxes are complex. To help reduce the burden, a financial advisor can help you develop a comprehensive tax plan that ensures you’re adhering to all the legal requirements and not paying more tax than you need to.
Unbiased can connect you with a fiduciary financial advisor. Simply answer a few questions below to get started:
Do American expats pay US taxes?
Yes, American expats generally do pay US taxes. This obligation applies to all US citizens and Green Card holders, regardless of where they live.
All US citizens, even those who have never lived in the US, are subject to US tax for expats on their income.
Lawful permanent residents (Green Card holders) are also considered US taxpayers and must report their global income.
Are spouses of expats liable for US income tax?
The tax liability of an expat's spouse depends on their citizenship and residency status.
The following examples highlight the obligations in different circumstances.
Example 1: US citizen or Green Card holder spouse:
Subject to US taxation on their worldwide income.
Must file a US tax return annually.
Can claim foreign tax credits to avoid double taxation.
Example 2: Non-resident alien spouse:
US-sourced income is taxable in the US
Foreign-sourced income is generally not subject to US tax.
Filing status (jointly or separately) affects tax liability.
How do US taxes work for expat retirees?
US taxes for expat retirees are largely the same as for working expats.
US citizens and Green Card holders remain subject to US taxation on their worldwide income, including pensions, 401(k) distributions, and Social Security benefits (partially).
Key Differences for Retirees:
FEIE: The Foreign Earned Income Exclusion may no longer apply.
Tax treaties: Specific provisions may apply to retirement income.
State taxes: Check your former state's tax laws.
Considerations:
Filing requirements: They still apply, even with lower incomes.
FBAR reporting: Foreign bank account reporting is still necessary.
Tax planning: Early planning is crucial to minimize tax liability.
When are US taxes due for expats?
US expats receive an automatic 2-month extension for filing their tax returns, making their deadline June 15th.
If needed, an additional extension until October 15th can be requested. However, tax payments are still due by April 15th.
What tax form does a US citizen living abroad file?
US citizens living abroad generally file the same tax form as those living in the United States. This means there is no separate US tax form for expats. The tax form that US citizens living abroad will need to fill out is Form 1040.
Although there is an automatic 2-month extension, you can request an additional extension until October 15th by filing Form 4868.
Remember, while filing extensions are available, tax payments are still due by April 15th.
How do you declare income from abroad?
All US citizens and resident aliens must report their worldwide income, regardless of where it was earned, on their US tax returns.
To do so, they must:
Gather documentation: Collect all relevant records.
Report on Form 1040: Use Form 1040, the standard individual income tax return.
Claim tax credits or exclusions: Utilize the Foreign Tax Credit (Form 1116) or the Foreign Earned Income Exclusion (Form 2555).
US tax treaties with various countries also enable the exchange of financial information, aiding the IRS in tracking foreign income. These treaties aim to prevent double taxation by clarifying which country has the right to tax certain income.
Get expert financial advice
US citizens living abroad maintain their tax obligations to the United States, even while residing in another country. The key aspects of US taxes for expats include filing requirements, deadlines, tax treaties, and choosing the right forms.
When it comes to getting expert financial advice on the intricacies of US tax for expats, let Unbiased match you with an SEC-regulated advisor.
Senior Content Writer
Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.