Expatriate Tax Returns

Living overseas generates many unique tax opportunities as well as tax risks. As a general rule, US Citizens and Green Card holders are obligated to file a US tax return during the time they are overseas. We have the experience and training to help you navigate through this process.

The Foreign Earned Income Exclusion is the single largest tax advantage available to you.

If elected, your first $87,600 earned overseas are exempt from income tax, unless you are an employee of the US government. Note that if you are a Foreign Service employee, and your spouse works in the local economy, the exemption still applies for your spouse; however, the calculation changed in 2006 and results in a slightly higher tax bill.

In order to benefit from this exclusion, the taxpayer must meet one of the following situations:

1. A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year ( bona fide residence test ),
2. A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or
3. A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months. (Physical presence test )

There are a number of other overseas US taxpayers that may have special situations. If you are unsure of your status (i.e. living in Iraq, or you left the foreign country due to extenuating circumstances) please contact us and we will answer specific questions you may have.

For example:

1. Employees of the US government: You are not eligible for the foreign earned income exclusion (Non government employee spouse and dependents can be).
2. Military families: You receive significant benefits from the Military Families Tax Relief Act of 2003: Home Sale Preferences and Combat Pay Exclusion are two benefits that can help you. You may also be eligible to deduct home leave expenses as a miscellaneous business expense.

Other considerations and opportunities include the following:

1. Need to File State Returns—Certain taxpayers must maintain a state of domicile in the United States, and there will be tax obligations to that state (Varies by state, please contact us for details).
2. Foreign Housing Exclusion or Deduction-- In addition to the foreign earned income exclusion, you can also claim an exclusion or a deduction from gross income for your housing amount if your tax home is in a foreign country, you have self employment income, and you qualify under either the bona fide residence test or the physical presence test.
3. Retirement You still qualify for the tax advantages of making contributions to a retirement account, such as SEP, IRA or ROTH IRA. These contributions are subject to certain limits based on your gross income, so for the most part the foreign earned income exclusion will not affect them.
4. Other Income Did you rent your property while living abroad? Your rental income is reported, along with related expenses including but not limited to mortgage interest expense. Dividend or other investment income? Reported, less related expenses.
5. Are you self employed but working overseas? You are in need of a tax plan. You could be saving at least 6% of your gross income.

For further details regarding your tax situation as a US Taxpayer living abroad, please contact us and we will gladly answer your questions.

We focus a large portion of our efforts on tax return preparation and tax planning for American taxpayers living abroad. There are key differences between our practice and other tax return preparers that allow us to assure you a 100% accurate tax return that minimizes your tax liability - audit protection guaranteed. Why?