3 Things to Know About US Expat Taxes for an American Family

October 1, 2022 | | 3 minute read
Expat Tax Blog. Tax Tips for US Americans abroad.

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Living abroad with your family can be an exciting adventure, but not one that comes without its worries. Especially when it comes time to file your US expat taxes for an American family, you’re probably particularly stressed. After all, you don’t want to miss any tax deductions or worry about filing incorrectly with the IRS.

In this post, we’ve put together a few things to keep in mind about US expat taxes for an expat family. These tax tips can help you claim as many deductions and credits as possible. And it keeps your hard-earned money in your pocket!

1. Receive More on Stimulus Payments: Qualifying Children

President Biden signed the American Rescue Plan into law on March 11, 2021. One of the most significant aspects of the new legislation is something that’s been on everyone’s mind: stimulus checks. Many American expats have already started receiving their economic impact payments. However, those living abroad may not even know they qualify for this relief.

The good news is that qualified Americans abroad will automatically receive their payments if they’ve already gotten the first two stimulus checks and/or have already e-Filed their US taxes on 2020 tax returns. Married couples filing joint returns qualify for a stimulus check if their combined earnings are below $150,000.

In addition to the sum you’ll receive for yourself and your spouse, you can also claim your qualifying children. Previous stimulus checks had tighter restrictions on dependents. Now, you’re able to claim dependents, like US citizens abroad and children, who are over 17 and who have a valid Social Security number. Long story short: if you have a child in college who is still your dependent, you can receive additional funds for them within your stimulus check.

2. Claim Child Tax Credit

You can take advantage of the Child Tax Credit when filing your US expat taxes. In the past, the Child Tax Credit allowed parents to receive up to $2,000 credit on their taxes for each dependent child under 17. However, the Child Tax Credit has been expanded under the terms of the American Rescue Plan.

Now, American families can receive $3,600 for each child aged 5 and under or $3,000 for each child aged 6 and over. These amounts apply to married couples who earn $150,000 or less; those couples who jointly earn more than $150,000 but less than $400,000 can still qualify for the original $2,000 tax credit.

With this new plan, families will issue periodic payments for them to receive an advanced check from the IRS. It will be for up to half of the tax credit amount throughout the second half of 2021 (July to December). The IRS has to still confirm, however most likely these advance payments will only be available to those who have a residence in the United States.

Additionally, if you’ve lived in the United States for at least half of the year, the $2,500 minimum income requirement has been removed. Now, the sum is completely refundable! US expat taxes for an American family have never been more beneficial.

3. Qualify for Foreign Housing Exclusion Benefit

The Foreign Housing Exclusion is an incredible benefit that helps save on US expat taxes for an American family. US citizens living abroad can deduct some excess housing expenses paid by their employer from more than 16% of the Foreign Earned Income Exclusion amount for that particular year.

Besides your housing expenses themselves, you could also qualify for deductions. Think utilities, household repairs, personal property insurance, and more. It’s important to note, though, that mortgage payments do not qualify.

To qualify for this benefit, you have to also qualify for the Foreign Earned Income Exclusion (FEIE). You’ll have to pass either the Physical Presence Test or the Bona Fide Resident Test as an American living abroad.

  • For the Physical Presence Test, you must have been outside of the United States for 330 full days within a consecutive 12-month period beginning or ending in the tax year.
  • For the Bona Fide Resident Test, you must be a resident in another country and be subject to local income taxes for a minimum of an entire tax year (January 1st to December 31st).

If these circumstances apply to you and you qualify for the FEIE, you’ll need to fill out Form 2555. This form lets the IRS know which of the above tests you are eligible under in order to receive the Foreign Housing Exclusion benefit. 

American Family Abroad Tax Support

The previously mention tax benefits can help you and your family save as much money as possible on your US expat taxes. Furthermore, it’ll help you keep more money to support your life abroad.

It can be complicated figuring out which forms to file. Or worse, determining whether you even qualify for all of these benefits. Instead of dealing with the IRS yourself or hiring an expensive tax accountant abroad to handle your taxes, turn to us at MyExpatTaxes! According to Yahoo Finance, file expat taxes as an American abroad with the leading, most affordable software.

Our expat tax software allows you to file your taxes quickly and easily. Plus, it ensures you, an American expat, claim all the deductions you might be qualified for and that your information is secure. Contact us today to learn more!

Written by Michelle H.

October 1, 2022 | | 3 minute read

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