8/9/2019 Expatriate Taxation Citizens Living Abroad Taxes

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US INCOME TAXATION OF AMERICANS AND

EXPATRIATES LIVING ABROAD - Green Card

Taxes - Form 2555 Instructions - Foreign Earned

Income Exclusion -Form 1116

US INCOME TAXATION OF AMERICANS AND EXPATRIATES LIVING ABROAD - Green Card Taxes - Form 2555 Instructions - Foreign EarnedIncome Exclusion - Form 1116 Instructions - Foreign Tax Credit

Expatriate Taxes are filed by United States citizens and Residents F1 H1 J1 L1 TN G4E2 visa, green card tax holders who live and work outside the United States.Expatriate Tax laws as mentioned by the IRS are complex, for Expatriate TaxServices Contact Us.

United States citizens who live or work outside United States, are consideredExpatriates for tax purposes, and have to report their worldwide income and fileUnited States Income Taxes.

 Also if the expatriates or green card tax holders relinquish their US citizenship they have to file Form 8854 - Expatriate Tax Statement Learn More. Failure to file Form8854, carries a penalty of $10,000

Expatriate tax obligations to the United States, can be reduced by Expatriate Tax

Exemptions, by filing IRS Tax Forms 2555, Form 1116

1. Foreign Earned Income Exclusion - Form 2555 Instructions Learn More

2. Foreign Housing Exclusion - Form 2555 Instructions Learn More

3. Foreign Tax Credit - Form 1116 Instructions Learn More

 We will explain each of these to reduce the expatriate taxes required to be filed by aUnited States citizen, living and working outside the United States.

1. Foreign Earned Income Exclusion - Form 2555 Instructions

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Income tax rules for expatriate taxes allow expatriate tax exemptions, to offsetdouble taxation by filing IRS tax form 2555.

By Filing Form 2555 you may be able to claim upto $87,500 of your foreign earnedincome (foreign earned income minus foreign housing exclusion) in 2008.

If both you and your spouse work abroad, you can claim upto $ 171,400 in foreignearned income exclusion.

 You can claim Foreign Earned Income Exclusion if you have foreign earned incomeand meet all the three requirements;

a) Foreign Tax Home

US Citizen or Resident Alien with a Foreign Tax Home. Tax home is the main place

or work, business in a foreign country, and not the family home in United States.

 b) Bona fide Residence Test

US Citizen or Resident Alien (has Tax treaty benefits or national of the ForeignCountry), who is a bona fide resident in a foreign country. Bona fide residence meansestablishing a presence in a foreign country like extended stay, intention and purposeof your stay like for work or for business.

c) Physical Presence Test

US Citizen or Resident Alien who is physically present in a country for more than330 days in a year.

2. Foreign Earned Housing Exclusion - Form 2555 Instructions

Foreign Housing exclusion applies for amount paid for a house (Rent, Utilities etc.,)in a foreign country, with employer provided funds.

Foreign Housing deduction applies for amount paid for a house in a foreign country, with self-employment earnings like involving in business activities.

If you donot have self employment income, you cannot claim Foreign housingdeduction.

3. Foreign Tax Credit - Form 1116 Instructions

Foreign taxes paid by a US taxpayer can often be credited against US tax liability ordeducted in figuring taxable income on a US income tax return. It is often better toclaim a credit for foreign taxes rather than to deduct them.

Form 1116 needs to be filed to claim a Foreign Tax Credit by Expatriates, for taxespaid or accrued to a Foreign Country 

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outside the United States during a tax year. Its filed along with Form 1040. YourForeign Tax Credit is reduced , if you are not reporting your foreign income in Form1040 based on; 1. Foreign Earned Income Exclusion

2. Foreign Housing Exclusion

3. Income from Puerto Rico, exempt from US Tax

4. Possession Exclusion

5. Extra territorial Income Exclusion

However you can claim Foreign Tax Credit, without filing Form 1116 if you meet thefollowing;

1. Source of Foreign Income is Passive Income - Interests and Dividents

2. Your Foreign Tax Credit to be claimed is not more than $300

3. Your foreign income and taxes are reported on Form 1099 INT or Form 1099 DIV 

Expatriates can avoid double taxation if a tax treaty exists between the United Statesand their foreign country.

For Expatriate Tax Services, green card taxes please Contact Us or post yourquestions in the Forum.