You won’t find many people who disagreethat moving is a hassle. There are boxes to pack, utilities to shut off andvarious arrangements to make before you leave to start a newchapter. It can take weeks, if not months, to sort through all the admin and confusionand feel settled in your new home.
Moving to anew country is even more hassle. Instead of just hiringa moving truck, you mayneed make shipping arrangements. You have tocommunicate about your new living arrangements and utilities with peoplethousands of miles away who may not speak English as a first language.Your to-do list includes items like getting a work visa, figuring out how tobring your pets with you, open a foreign bank account, taking care of yourhealthcare needs and last, but certainly not least, researching your tax responsibilities.
With so much to do and take care of, it canbe easy to put tax filingas an expat on the back burners, especially if thefiling date is still months away. However, if you chose to do that, you may getan unpleasant surprise come tax time.
As to be expected, tax laws vary greatlyfrom country to country. It’s good practice to research the tax laws of your newhomeland before you move, even if what you discover isn’t a deal breaker foryour family.
What you may be even more surprised tofind out; however, is that while you need to navigate new tax codes, yourresponsibility to fileto the United States government remains the same.That’s right, even after you move, the Internal Revenue Service (IRS) wants arundown on your finances.
That’s the bad news: One income, two tax filings.
The good news is most expatsdo not end up actually paying any U.S. taxes due to benefits that can be claimed that are designed to eliminate double taxation. These benefits - The Foreign EarnedIncome Exclusion and Foreign Tax Credit - essentially allowexpats to write off a portion of their income from U.S. tax. Theamount that can beexcluded using the Foreign Earned Income Exclusion variesfrom year to year depending on inflation, but for 2021, that amount is $108,700per person. Excluding this portion of your family’s income can dramaticallylower your tax liability to the U.S.However expats still have to file to claim these provisions.
If you have recently moved abroad, don’ttry going it alone at tax time. Hire a professional who specializes in expat taxes - even if you do notexpect to owe any taxes to the IRS. A professional can:
