We know that living or working outside of your country is exciting and has many benefits. But there are several things to consider as well. One of the most vital things to consider when US Income Tax For Us Citizens Living Abroad. You need to pay taxes to both the US and the country where you live currently. The US has taken measures to ensure that taxpayers don't have to pay redundant taxes with tax exemptions and credits. With in-depth knowledge, US expat tax doesn't have to mean a worse.
If you are a US expat and living abroad for more than 339 days of the tax year, you are qualified to claim the foreign earned income exclusion. About $90,000 can be excluded for an individual and if a spouse lives abroad in can be mire greater. Taxes should be filed with the internal revenue system (IRS) in order to claim this exclusion and all the appropriate forms completed and submitted on time or before tax filing deadline. This exclusion may be owed as well as is worth the time to look into for the tax expat.
- Foreign tax credits
Foreign tax credits mean to credits that can be claimed on Federal tax for nonresidents that minimize the number of taxes owed to the US. These can be claimed as a credit on our taxes if the taxes are paid to an overseas country.
You must fill out the proper paperwork and file the right evidence that it was paid on time. This is designed to reduce the possibility of paying taxes twice on the same income. You have to do some research to figure out these credits, but it is well worth it undoubtedly.
- Social security & Medicare
They are another concern for US tax expats. If the company you are working for is a US company in overseas operations, then social security and Medicare will be taken out most of the time. In case the company is an overseas company, then these taxes will not be taken out. US employees will not be needed to pay taxes in most foreign companies. But they have to pay into the social taxes of the country in which you are residing.
Also, some of the US companies have made special arrangements to take out social security or even Medicare. These workers will pay into the social taxes of the nation in which they live or work on.