4 Expat Tax Tips Before Moving Abroad

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4 Expat Tax Tips Before Moving Abroad

Moving abroad is always an uphill job as most people need to meet seemingly endless requirements, file a lot of paperwork, and ascertain the types and amount of tax-deductible from their respective incomes. While many expats may be troubled by the prospect of double taxation being levied on them, there are quite a few benefits of expat status in many countries such as the US and UK. Here are a few tax tips for expats that are moving abroad. 

  1. Avoid Double Taxation 

Expats may be dreading double taxation (tax levied both in their home country and the one they have moved to) but applying and qualifying for Foreign Earned Income Exclusion or FEIE can mean that a considerable portion of their money up to $100,000 can be excluded from the tax net. An expat needs to spend at least a month in the US everywhere to qualify for the FEIE or become a permanent resident. Tax savings can be achieved through this method especially if the expat is living in a jurisdiction that has a high tax bracket applicable. 

  1. Tax Returns 

Expats should bear in mind that they need to file their tax returns even if they are gone from the country for long periods of time. One of the reasons that this is so is because foreign income is also liable for US taxation in most cases so the expat needs to continue to file their returns. Worldwide income is the concept followed in the US and in some other countries so income earned globally can potentially all be subject to tax by the same country. 

  1. Keeping Track Of The Paperwork 

Expats need to be adept in handling paperwork because most of their time upon landing is consumed with obtaining and filling out forms and taxes themselves take up a lot of documentation. If at any point you are confused about the tax forms that may be applicable to you, make a point of consulting a tax consultant for foreign nationals, just to make sure you are meeting all your obligations. The Form 1116 and 2555 (dealing with foreign tax credit and foreign income exclusion respectively), FinCEN form 114, and the 8938 form that deals with foreign assets are some of the common ones that need to be filed with the relevant authority. 

  1. Deadline Extensions 

Expats are subject to less rigid deadlines when it comes to filing their taxes and submitting the obligatory paperwork for their status and residence. The extension can be as much as 2 months later than other citizens as the expat may need to file taxes in another country as well. A provision that can come in handy is that a further extension can be formally requested by an expat if they are having trouble deducing the tax due on their foreign income. Interest payments that are due on the paid tax however still accrue from the original date and it is hard to get those exempted.