Tax Refunds for Expats

While living abroad as a US citizen, you may need clarification on whether you qualify for a tax refund now that you live in a foreign country. Today we will explore several questions surrounding tax refunds for expats and hope to clarify some of your biggest questions! It’s not too late to claim US tax refunds, even as Americans Abroad.

What is a Tax Refund? 

The following terms should be familiar to you if you are filing your expat taxes for the first time abroad or filing US taxes in general. A tax refund refers to a reimbursement made to a taxpayer for any excess amount paid in taxes to the federal (or state) government. This generally happens when employers withhold too much from an employee’s paycheck. 

Tax credits differ from refunds, as explained below. 

Types of Tax Credits

There are two types of US Tax credits and refunds for Americans abroad. They are known as:

• Refundable Credits: These tax credits can reduce your tax liability to zero or beyond. For example, if you owe $800 in taxes but qualify for a $1,000 refundable credit such as the Earned Income Credit or Additional (Refundable) Child Tax Credit, you will receive a $200 refund! 

• Non-Refundable Credits: These are a dollar-for-dollar reduction of your tax liability that can only reduce your tax liability to zero. These will not come in a refund form on your return, but they are beneficial to use as an offset tool for reducing an existing liability. An example of this includes the Saver’s Credit or Foreign Tax Credit. 

Potential Refunds 

Most US expats will not owe US taxes thanks to certain expat tax benefits such as the FEIE (Foreign Earned Income Exclusion), FTC (Foreign Tax Credit), and international tax treaties. As US taxpayers abroad may deduct or exclude tax debt, qualifying expats may see a payment for refundable tax credits. 

1. The Additional Child Tax Credit: for those who have a child younger than 17 at the end of the tax year, whom they may claim as their dependent. The Additional Child Tax Credit for all Americans is a maximum of $1,500 per qualifying child.

2. American Opportunity Credit: For those that have qualifying educational expenses at eligible educational institution (includes some foreign schools), up to $1,000 can be refunded.

3. Earned Income Credit: If you have lived in the US for at least six months of the filing year and are a low-income earner, you may apply for this refundable credit. 

In 2022, the Biden administration temporarily increased the refundable portion of the Additional Child Tax Credit to a maximum of $3,600 for 2021 tax returns. However, this only applied to Americans who lived in the US for more than 6 months. Most expats were only eligible for $1,400. Meaning for tax year 2022, the $1,500 maximum is actually an increase in benefits.

There can be even more US tax credits and refunds available to US citizens living abroad, depending on your situation. MyExpatTaxes can help you figure out which tax credits apply to you individually if you need clarification! 

While the above three credits are closely related to children and other dependents, you may still be entitled to other tax refunds while living abroad even if you don’t have any to claim on your tax return. 

Want Faster Refunds? 

One of the fastest and simplest ways to receive your tax refund quicker is by e-filing and filing early. While Americans abroad can enjoy an extension on filing their taxes, if you can file early, you will see your returns and refunds quicker. 

When e-filing, the IRS can process the return almost immediately, and they may issue your refund in as little as three weeks. If you can choose direct deposit to an American bank account, it will help prevent delays that mailed checks tend to bring when living abroad. As a reminder, the IRS can only direct deposit into US bank accounts; if you only hold a foreign bank account, the IRS will mail you a check directly. 

If you cannot e-file for any reason, and must paper file, then you can expect to receive your refund, if applicable, within 6 to 8 weeks from the date the IRS receives your tax return. However, the time for the IRS to receive your tax return can be up to a year due to delayed processing times for paper mail stemming from the pandemic.

Where is My Refund? 

Would you like to keep track of your refund status? The IRS has a web portal where it is possible to check your status. You will need your social security number, filing status, and exact refund amount to log in! 

Come get your refund at MyExpatTaxes

Don’t miss out on all your potential refunds this tax year! File with MyExpatTaxes to ensure their are no extra delays when it comes to your taxes!