Moving abroad is exciting, but the complexity of international taxes can quickly turn your dream into a nightmare. For U.S. citizens in particular, the obligation to file a U.S. tax return on worldwide income remains, regardless of where you live. This is where savvy expat tax advice becomes crucial.
The first line of defense against double taxation is utilizing key IRS provisions. The Foreign Earned Income Exclusion (FEIE) may allows qualifying expats to exclude all the significant portion of their foreign-earned income from U.S. taxation. Alternatively, the Foreign Tax Credit (FTC) provides a dollar-for-dollar credit for all the income taxes paid to a foreign government, offsetting your U.S. tax liability. Choosing tax advice for expats between these two requires careful calculation.
Beyond income tax, compliance with foreign financial reporting is paramount. The Foreign Bank Account Report (FBAR) and then the well known Foreign Account Tax Compliance Act (FATCA) may requires all the disclosure of the foreign bank accounts and assets if they exceed certain thresholds. Non-compliance carries severe penalties.
Understanding tax treaties between the U.S. and your host country can further optimize your situation by clarifying which country has the primary right to tax specific types of income. Given the intricate nature of multi-country filing, consulting a tax professional specializing in expat tax is the single most important piece of advice to ensure compliance and maximize your savings. Don't go it alone!
The first line of defense against double taxation is utilizing key IRS provisions. The Foreign Earned Income Exclusion (FEIE) may allows qualifying expats to exclude all the significant portion of their foreign-earned income from U.S. taxation. Alternatively, the Foreign Tax Credit (FTC) provides a dollar-for-dollar credit for all the income taxes paid to a foreign government, offsetting your U.S. tax liability. Choosing tax advice for expats between these two requires careful calculation.
Beyond income tax, compliance with foreign financial reporting is paramount. The Foreign Bank Account Report (FBAR) and then the well known Foreign Account Tax Compliance Act (FATCA) may requires all the disclosure of the foreign bank accounts and assets if they exceed certain thresholds. Non-compliance carries severe penalties.
Understanding tax treaties between the U.S. and your host country can further optimize your situation by clarifying which country has the primary right to tax specific types of income. Given the intricate nature of multi-country filing, consulting a tax professional specializing in expat tax is the single most important piece of advice to ensure compliance and maximize your savings. Don't go it alone!
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