What U.S. Taxes Apply to People Who Have Left the U.S.?

As a U.S. expat (assuming you are a citizen/green card holder), you are required to file an annual tax return to the IRS – reporting worldwide income. Don’t believe us? Look at the U.S. passport, Page 52, Section D. You might even be liable for filing the FBAR to the Financial Crimes Enforcement Network.

What U.S. taxes DO Apply for U.S. expats Abroad?

All incomes, basically. If you’re earning above the reporting threshold (foreign or U.S. sourced income), you have to calculate your U.S. taxes owed on Form 1040 like every other American.

However, fear not! Due to expat tax benefits and tax treaties, it is quite rare that you would actually be double taxed!

What are some of these benefits:

  • Foreign Earned Income Exclusion You can exclude up to approx $100K USD of foreign earned income per year. This is if you are a bona fide resident abroad / have been physically out of the US for 330 full days.
  • Foreign Tax Credit Do you pay income taxes in your host country? Then most likely you can take a $ for $ credit for your owed U.S. taxes. If you’re living in a country where the income tax rate is higher than the US (most European countries), then you will probably always have the more foreign tax credit than you can even use!
If you live in a country with a lower income tax rate, you may still owe some US taxes – but not as much as you would have paid making that same salary in the US.

The trick is knowing how to claim those benefits! That’s why we can help at MyExpatTaxes. We provide the only tax software designed for US expats with a fixed/affordable price.

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