Things you must know about U.S. ex-pat taxes

by Victor Mmartinez Victor Mmartinez

Summary: If an individual's worldwide income goes beyond the tax threshold, he or she needs to file a U.S. tax return every year. Earning includes salary or wages, dividends, interest, and rental income. United States taxes are placed on citizenship instead of residency. It means a legal U.S. citizen owes a tax liability to the U.S.

Tax liability for American ex-pats

Does an ex-pat need to pay taxes? Yes, citizens of the United States who are living abroad have to file tax returns yearly. There are different mechanisms for preventing American people from getting exposed to high taxes on foreign-earned money. U.S. ex-pats can get benefits from FTC (The Foreign Tax Credit), FEIE (The Foreign Earned Income Exclusion), and the foreign housing exclusion.

Living abroad does not spare an individual from being a subject to U.S. tax returns. Though, the approach may vary depending on the state the person lived in before moving overseas. If you are confused, whether or not you carry any tax obligation, you should consult with a professional who specializes in this subject, ensuring you remain compliant.

You can lose your passport

If you are a U.S. citizen who is living outside and avoid filing tax returns, you may lose your passport. Someone who is not compliant with U.S. ex-pat taxes may also need to pay fines or penalties that can be a couple of dollars and even jail.

So many Americans live and work abroad and often ignore their tax liabilities. Many individuals are not even aware that they need to file U.S. ex-pat taxes. If you are living outside without paying your taxes for years, you need to ensure it was an unintentional mistake.

Are you married to a non-American?

Someone married to a non-American has various options with major implications for tax return. For instance, if someone considers filing jointly with an NRA spouse, they may need to pay on their income combined. One must choose carefully how to file his or her U.S. ex-pat taxes. Mistakes may lead you to financial repentance for years. It is better to hire an expert for Filing U.S. taxes from abroad.

Claim kids as dependants

You can claim your kids as dependents, and seek child tax credit. Though, while living abroad, your eligibility may differ. For instance, if you consider claiming the FEIE, you are qualified for acquiring the refundable part; it means the child tax credit is not going to lead to any refund by itself.

Note

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