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Understanding the US expat taxing system can be challenging. And when you are an expat, things can appear even more confusing. Nearly all US citizens living abroad need to file a foreign tax return in their country of residence.
For Americans, it is mandatory to file a US Federal Tax Return regardless of where they live or work. In addition, the expats are required to file US tax forms such as FATCA and FBAR.
Isn’t that sound complex? If you are a US citizen living abroad and looking for efficient ways to file and understand taxes, this article is for you.
Do All US Expats Require Filing Taxes?
The simple answer is Yes, they do. Virtually all US citizens need to file a US Federal Tax Return no matter where they live. So, as long as your worldwide income exceeds the taxing threshold, you are bound with the US tax filing slab, irrespective of your geographical location.
The worldwide income includes salary, wages, dividends, interest, and rental income. For self-employed individuals, the tax filing threshold is $400. If your income does not exceed the tax filing threshold you will still need to file
As mentioned above, all Americans have to file a US tax return, and most citizens living outside may be exempted. The US Expat Tax filing system offers several deductions, credits, and exclusions to ensure that Americans living in foreign countries are not taxed twice on their income.
US taxpayers can use these tax benefits to erase their tax bills. American expats are eligible to claim Foreign Tax Credits against the income that their host country has already taxed. For exclusions, you still need to file your tax return to prove your eligibility for tax benefits.
Use Foreign Earned Income Exclusion (FEIE)
Make sure you are qualified for Foreign Earned Income Exclusion; however, you can also opt for it by filing Form 2555 or Form 2555-EZ.
Once you fill up Form 2555, you can include it in your income filing each year as it remains in effect thereafter. When you no longer…
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