Foreign tax is a bit complicated and we can explain some important matters regarding:

Top 10 Things to Know about Foreign Taxes                     

A Staring Place

  1. USA taxpayers while earning or making income need to file a USA tax return when abroad. This is because the US “taxes worldwide income.”
  2. In order to reduce or eliminate double taxation there exists the Foreign Earned Income Tax Exclusion (FEIE) and the Foreign Tax Credit
    1. This relates to being out of country 330 days or more within a one year period and is a deduction on your tax return $108,700 for 2021 – This is time based and can be achieved a partial year – The deduction is doubled when two people are working
    2. The Foreign Tax Credit can be used instead of the FEIE which is common when actually paying foreign tax in another country and making more than the FEIE limits.
  3. There are also foreign housing related possible deductions.
  4. Caution on all foreign bank account reporting requirements from having any account, an account over $10K at any time, and an account over $50K at any time.
  5. Be sure to cut CA ties as needed and know the CA rules and time requirements are different than the IRS.
  6. A tax extension is a likely first step in the first year you move to another country.
    1. You may need to wait the 330 days after leaving the country, at least, before receiving any partial FEIE benefit.
  7. If self-employed and abroad you will need to pay USA self-employment tax unless paying some similar to the foreign country where you work.
  8. Investment income will typically be USA taxed and not qualify for the FEIE.
  9. Track your travel schedule well and plan, plan, plan to ensure the proper deductions.
  10. There are many exceptions to all the rules so do consult a pro early, and plan.

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