Starting To Think About Filing Your Expatriate Tax Return? Wait! Read This First: How to Save Money on Your US Expat Taxes
Living and working in a foreign country, whether it is temporary or permanent, can be a fulfilling and rewarding experience. Moving to another country, although exciting, does come with some challenges and requires that you learn a bit of new information as it relates to your US taxes. In order to reap the full benefits of living abroad you need to do some research regarding your expatriate tax return obligation before you need to file. No one likes filing their taxes, and certainly no one likes to spend money unnecessarily, so saving money is crucial. This article will provide you with four great ways to save on your US expat taxes.
Take advantage of the Foreign Tax Credit & Foreign Earned Income Exclusion
While you're living abroad and filing your US taxes, it is important to make sure that you take full advantage of Form 1116 and Forms 2555, otherwise known as the Foreign Tax Credit Form and the Foreign Earned Income Exclusion, respectively. The Foreign Tax Credit gives you a credit on your US expat taxes for the amount of money you have paid in tax to a foreign government. The Foreign Earned Income Exclusion helps you by excluding a big chunk of your foreign earned income from your US taxes. This is important because even as a US expat, all of the income that you make outside the United States is subject to identical tax rates as someone who is working and living inside of the US. That is where Form 2555 comes in. By completing this form, you can exclude up to $91,500 USD of income earned abroad from your US expat tax return. While including potential deductions of housing and living expenses, it is possible to counterbalance most if not all of your tax liability in a given calendar year.
The Foreign Tax Credit (or Form 1116) is different than Form 2555 but they work together to help you save money on your expat tax return. It is important to no