Hi, Traveler!

This article is for informational purposes only and should not be considered tax advice. Always consult with a qualified tax advisor for personalized guidance.

Dear Traveler,

While being from the US has many advantages while living overseas, there are also some practical constraints. Especially where income tax is concerned, clever expats will educate themselves about how US taxes work for full- or part-time expats. As an expat, I know that it’s my responsibility to think through my own personal tax burden, and that tax laws are often changing.

The United States is unique in their taxation policies. Unlike most other countries, the US taxes its citizens worldwide, regardless of where they live. As a US citizen, you are expected to file your taxes annually. Period.

If you are also a tax resident of another country (and sometimes just a resident!), you will also need to file taxes in your host country as well. Every country has its own approach to taxation.

To me, taxation is an important part of being an immigrant in another country. I don’t expect to freely enjoy another culture or another country without paying my fair share of taxes and fees. However, I don’t want to pay taxes twice on the same income. That’s called double taxation.

Well, there’s hope for those of us who live overseas. Most countries have tax treaties with the US to prevent double taxation. What most countries have agreed to do is to allow US citizens pay their US taxes, and then only tax you for any additional amounts that would have been paid to your host country.

So that means if you file your US taxes and have to pay $100 in taxes, you will pay that first. When you file your taxes in your host country, you will only have to pay the difference. So if your host country requires you to pay $114 in taxes for the same income year, you will only pay the $14 above what you paid the US.

While that is a pretty simple example, it’s important to get qualified tax support in your new country to ensure compliance with the local tax laws.

I would also research the Foreign Earned Income Exclusion (FEIE): US citizens living abroad can exclude a certain amount of foreign income from US taxes. Here’s some information from the IRS that can help you understand how that works: https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion

If you are seeking tax support in other countries, then suggest you have a conversation with your US-based tax personnel first. In other countries, there are tax accountants and sometimes tax attorneys who provide a similar role in your expat home.

Clever Expat Bonus Tip! Stay organized! Keep track of all your income and expenses in both the US and your new country. This will make filing taxes (and the life of your accountant and tax attorney) much easier. Think of it as building a map of your adventures abroad.

You’ll definitely find that there are many differences around taxation in your new home. While you will have to figure out your own plan for taxation, check out this book from the Clever Expat Bookshelf. Once you read it, you’ll be MUCH more prepared to make the financial decisions necessary for a successful expat experience!

Keep exploring!

The Clever Expat