Tax concerns for US expats living abroad
Death and taxes are the only certainties in life. Even if you are an expat living abroad.
The truth is, moving to another country does not exempt you from filing income tax in your home country. In fact, Americans may have to continue to pay state taxes as well. And then there are taxes in your adopted country to deal with as well.
Before making the decision to move abroad, you need to know exactly what your home country will expect of you, and what your adopted country's laws are as well, because the last thing you want is to find yourself in hot water with either government.
Here's the good news
If you're American and live abroad for an entire calendar year, or 330 days out of the past 365, you do not have to pay US federal income tax on earnings less than $91,500. For a married couple filing jointly, double that. You also may be entitled to tax credits for housing costs. Plus, if you pay income tax in your host country, that income may be excluded from taxation in the US as a result of tax treaties in place with several foreign countries.
The tax deadline for ex-pats is different as well. Americans living abroad have until June 15 to file, and can file an extension until October 15. Most ex-pats file for an extension their first year abroad just to make sure they've met the 330-day requirement for living in another country.
Self employment tax
However, if you're self-employed, you may still have to pay your Social Security Tax (known as "self employment tax" to some), regardless of whether you meet the $91,500 wage limit. Plus, even though you may not have to pay taxes, you do still have to file. The only way to get out of that obligation is to give up your citizenship.
Obviously, local tax rates will vary wildly depending on where you choose to live. And in some countries, you may not be required to pay personal income tax at all. As in the United States and Canada, some countries may have both federal (country-wide) and local (state or city) taxes to deal with. Not only that, but if you buy property, you will most likely have to pay some kind of property tax as well. Again, only by thoroughly researching your options will you have a clear idea about the ins and outs of taxes in your adopted homeland.
Consult a tax professional
Wherever you choose to live, you'll want to consult a tax professional who is knowledgeable not only about US or Canadian tax laws, but also about the laws in your host country. A good place to start is your consulate.
You may also be interested in:
Epat taxes in :
Australia, Canada, Denmark, Gibraltar, Ireland, Luxembourg, Malta, The Netherlands, The United Kingdom, The United States
We would love to hear from you about your tax experience as an expat.