Generally, US taxpayers living abroad as Expats have access to the same exemptions, deductions, and credits like citizens living in the United States. Expats also have access to the Foreign Income Exclusion that we discussed in a previous article. However there are some additional considerations for expats planning to file their taxes while living abroad.

  •       Any income or expenses you claim for the foreign income exclusion cannot be used or claimed on any other related credits or deductions that can be claimed. Example: you cannot use the housing expenses you claimed on the foreign housing exclusion as a deduction.
  •       Exemptions can be claimed for your children born abroad, so long as you are a US citizen at the time your child was born, even if your spouse may not be a non-citizen.
  •       Charitable contributions made to foreign charities are generally nondeductible. There are some exceptions for some Canadian, Mexican, and Israeli charities due to certain tax treaties.
  •       Moving expenses may be deductible if the expenses incurred are related to your work at a new location.
  •       If you pay taxes to a foreign country, you may be eligible for an income tax credit based on the amount you pay to a foreign country.  Use IRS Form 1116 “Foreign Tax Credit” to figure the amount of foreign tax paid to determine the credit.
  •       If you chose to not claim the credit, foreign income taxes can also be taken as a deduction instead. Report it as a deduction on your schedule A for your 1040 Form.
  •       The United States has negotiated many tax treaties with other countries. Under these treaties, US expats are entitled to certain credits, deductions, exemptions, and other options to assist their tax liabilities. For more specific details, the IRS website provides details on these treaties and what can be claimed.

Hopefully you found this info for expat taxes informative. As complex as the tax code can get here in the states, just imagine how complex each person’s taxes can get if they live abroad! We here at MiklosCPA, a SoCal CPA firm, have knowledge and experience in helping expats and foreign nationals plan and properly prepare their taxes for compliance with the IRS. If these articles have piqued your interest, please do touch base with us.

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