Five Things You Need to Know About US Expat Taxes

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A U.S. expatriate, often shortened to expat, is a person that temporarily or permanently decides to reside in another country. This includes students, professionals, skilled workers, or artists who take positions outside of their home country. If you are or will be one of these individuals, then you need to remember that the U.S. taxes you on your worldwide income. This means you have to disclose certain foreign financial accounts and assets. Here are 5 things you need to know about tax for expats.

1. Track The Time

If you want to ensure you qualify for tax for expats, and potentially save thousands of dollars on your tax return, then you need to keep careful track of your travel dates. If you plan to qualify via the Physical Presence Test, then you must be physically present in a foreign country for 330 full days. This means that the time spent in between – be it travelling by air or sea – does not count. If you prefer the bona fide resident test, then you must establish a residence in a foreign country and reside in this country for an entire uninterrupted tax year. You are not subject to this foreign country’s income tax laws (although this is determined on a case to case basis).

2. You Must File

If your worldwide income exceeds the filing threshold (this varies by filing status), then you are legally required to file US federal tax for expats every single year. What is considered income? Any wages, including non-US sources, interest, dividends, and rental income. If you are self-employed while living abroad, then the threshold is $400, regardless of your filing status. Even if you may not have to file, you still should because you could be missing out on certain credits and refunds. US taxpayers who live outside of the US also receive a filing extension. But be careful, if you owe US taxes, then they are due before the extension, or else you could face penalties and interest.

3. State Tax Return

Some states will require you to file a tax return even when you are living abroad, and this is determined by a critical component: is the taxpayer intent on returning? Every state has a different ruling regarding temporary and permanent places of abode. These rulings will determine whether or not you are still considered a resident, and therefore, must file. California, New Mexico, North Carolina, and New York are all states that will most likely require tax for expats, so you’ll have to file a state tax return.

4. Social Security

Not everyone will have their benefits taxed, but you are still required to claim any social security benefits as income on your US tax for expats. The general rule for whether or not these benefits are subject to tax is based on your other income. If you have other income, your benefits will be taxed, but only 85% can be considered taxable income.


The Foreign Account Tax Compliance Act is intended to prevent US taxpayer from hiding additional money in offshore accounts and assets. Form 8938 should be filed if any income or financial asset exceeds the filing threshold – which is determined by filing status and residency on your tax for expats.

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