Biden’s Tax for US Expats

December 7, 2023 | | 4 minute read
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biden's tax plans for us expats

While some items are updated for the current tax year, the majority of this article is specific for Tax Year 2021. With one major article being about Biden’s tax plan.

The current news points to Joe Biden winning the United States Presidency. We won’t get into the details here and will just await the official Inauguration Date and update this post if needed. So will US citizens living on land and abroad feel a tax impact once Biden takes the official seat? And what effect will Biden’s tax plans on US expats have once he’s in charge of the White House? We’ll take a closer look at that today.

Every American’s Responsibility

Every American, both living in the United States and abroad, must file US taxes every year and report their worldwide income once they reach the tax filing threshold.

Additionally, expats can use IRS tax provisions such as the Foreign Earned Income Exclusion and Foreign Tax Credit to prevent getting double-taxed.

Then if you have over $10,000 in all your foreign financial accounts at any one time of the year, you’ll need to file the FBAR. You can do this easily when filing taxes through our software.

The deadline to file your US taxes as an American expat is June 15th (June 17th, 2024). However, you can file for a free extension through our software for the October 15 deadline.

It’s expected to do your part as an American abroad and file the necessary US taxes every year. Otherwise, penalties can be accrued, and no one wants to pay more than they need to! That’s why we’re here. Our DIY expat tax software and professional tax support team do their best to make you save money and become tax compliant.

Biden’s Individual Tax Plans

How will Biden’s tax plans affect Americans living abroad? Will tax laws change? Several of Biden’s tax plans include reversing the Trump tax reform – the Tax Cuts and Jobs Act.

For example:

  • Biden wants to raise the income tax from 37% to 39.6%. Due to this change, return to the highest income tax rate, payroll tax, and long-term capital gains for high earners will also increase.
  • A change in estate and gift taxes – going up from 40% to 45%.
  • The untaxed exemption limit will be reduced from $11.58 million to $3.5million.

To note, the above changes affect more high earners. Why?

  • For tax year 2023, the top tax rate remains 37% for individual single taxpayers with incomes greater than $578,125 ($647,850 for married couples filing jointly). So yes, if you are in this income bracket, the 37% is your tax rate.
  • Estate and gift taxes normally don’t apply until a taxpayer goes over their untaxed exemption limit. So you would need to giving more than $12M to be subject to these fees.

What happened and how it is now for Expats

In 2021, Biden increased the Child Tax Credit from $2,000 to $3,000 and made the entire amount refundable for families. However, in 2024, this is not the case even though it has increased from tax year 2022. Currently, for tax year 2023, the refundable Child Tax Credit is $1,600.

Taxes for Corporations and GILTI Tax

The corporation tax rose during Biden’s Presidency. Biden made the taxes increase to 28%, as opposed to Trump’s 21% in 2023.

If you are an American abroad with a foreign-registered business, you will be subject to the GILTI tax under Biden’s Presidency. GILTI stands for Global Intangible Low Tax Income

According to our How the US Election Will Impact Expats and Taxes:

Biden wants to double the GILTI tax rate from 10.5% to 21% if expats want to register a foreign business with a US parent company. GILTI is Global Intangible Low-Taxed Income, a concept from the Tax Cuts and Jobs Act. This makes corporate taxable income gets added from foreign income. This will be tough for expat entrepreneurs who own a foreign limited liability company incorporated outside the US, especially if it is 100% American owned

FATCA and Citizenship-Based Taxation

Joe Biden reached out to Democrats Abroad this year. He said he will work with Americans overseas and address expatriate taxation issues once he’s elected. As of 2024, this is correct.

Plus, his Democratic political party also spoke out against revoking citizenship-based taxation and the FATCA. Biden was Vice-President when The Foreign Account Tax Compliance Act – or FATCA – was enacted into law in 2010.

This law was founded and authorized by the US Treasury Department. It was made to track potential illegal tax activity and monitor American taxpayers and business folks earning income abroad. This is through tracking income or investments deposited into foreign bank accounts.

Through FATCA, the US government has the power to withhold payments from being deposited into certain foreign financial institutions and entities. US citizens and Green Card Holders living abroad will need to report their foreign assets if they exceed certain monetary thresholds under this FATCA law. Plus, foreign institutions (like banks) are also involved and need to report to the IRS the American clients’ assets.

Biden has no intention to change the FATCA. Plus, provide relief for US expats to report their foreign bank accounts and file US taxes.

Need Some Expat Tax Support?

Do need further advice regarding expat taxes and how to become tax compliant? Do connect with us by signing up for our software and accessing our resources of professional tax support and information!

If you are currently behind on your US expat taxes,take advantage of the MyExpatTaxes’ affordable and handy Streamlined Procedure. This program allows you to avoid penalties and save money.

Written by Michelle H.

December 7, 2023 | | 4 minute read

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