Understanding the US expat taxing system can be challenging. And when you are an expat, things can appear even more confusing. Nearly all US citizens living abroad need to file a foreign tax return in their country of residence.

For Americans, it is mandatory to file a US Federal Tax Return regardless of where they live or work. In addition, the expats are required to file US tax forms such as FATCA and FBAR.

Isn’t that sound complex? If you are a US citizen living abroad and looking for efficient ways to file and understand taxes, this article is for you.

Do All US Expats Require Filing Taxes?

The simple answer is Yes, they do. Virtually all US citizens need to file a US Federal Tax Return no matter where they live. So, as long as your worldwide income exceeds the taxing threshold, you are bound with the US tax filing slab, irrespective of your geographical location.

The worldwide income includes salary, wages, dividends, interest, and rental income. For self-employed individuals, the tax filing threshold is $400. If your income does not exceed the tax filing threshold you will still need to file

As mentioned above, all Americans have to file a US tax return, and most citizens living outside may be exempted. The US Expat Tax filing system offers several deductions, credits, and exclusions to ensure that Americans living in foreign countries are not taxed twice on their income.

US taxpayers can use these tax benefits to erase their tax bills. American expats are eligible to claim Foreign Tax Credits against the income that their host country has already taxed. For exclusions, you still need to file your tax return to prove your eligibility for tax benefits.

Use Foreign Earned Income Exclusion (FEIE)

Make sure you are qualified for Foreign Earned Income Exclusion; however, you can also opt for it by filing Form 2555 or Form 2555-EZ.

Once you fill up Form 2555, you can include it in your income filing each year as it remains in effect thereafter. When you no longer want to use Foreign Earned Income Exclusion, you need to apply for approval from the IRS, or else you won’t claim an exclusion for the subsequent five tax years.

Pass A Residency Test to Use FEIE

To become eligible to use the Foreign Earned Income Exclusion, the taxpayers are required to pass the Physical Presence Test.

This Residence Test proves that you are physically present in the host country for 330 out of 365 days. The American citizen needs to live in a foreign country for a period of at least one calendar year. Also, the taxpayer must have no intention to move back to America in the near future.

File FBAR if Your Foreign Account Balance Exceeds $10000

The Foreign Bank Account Report (FBAR) or Form 114 is designed to thwart tax cheats by keeping money in foreign accounts.

If the aggregate balance of all your account in foreign banks exceed $10000, you need to disclose that by filing FBAR through the BSA e-filing portal. The deadline for FBAR filing is April 18th which is the same as the due date for federal tax filing.

Similarly, American expats need to file FATCA (Foreign Account Tax Compliance Act) which prevents them from hiding money in assets. When the aggregate value of financia

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Tips for Taxes as an American Expat Living Abroad