2019 is nearing its end, and a little bit of expat tax planning can help you have a smooth transition into the new year. Use our five-step checklist to ensure you are as prepared as can be for 2020.
#1: Gather Your US Travel Documents
First things first: find your documents that demonstrate how much time you spent in the US during 2019. This will help simplify your expat tax process in 2020 because you won’t have to wonder if you should use the Physical Presence Test or the Bona Fide Residence Test in order to qualify for the money-saving Foreign Earned Income Exclusion (FEIE). The Foreign Earned Income Exclusion allows you to exclude $103,900 for your 2018 taxes, and $105,900 for 2019, so it’s worth the advance legwork for the money this expat tax planning will save you.
#2 Reduce Your Tax Liability
Take steps to ensure you don’t pay extra on your expat taxes in 2020. You can reduce your tax liability by donating to charities, but a word of caution: make sure that the charities are recognized by the IRS, as not all international charities are. Once you’re sure you’ve selected an eligible charity, include the donation on your Form 1040 Schedule A. And remember: even if you pledged to donate a certain amount of money to a charity, you can only claim the deduction the year that the organization receives your donation.
Also, don’t forget to maximize your IRA contributions, which are tax deductible. So, the more you are able to contribute, the less income you’ll have for the US to tax.
#3 Take Inventory of Your Stock Market Losses
If you had a particularly good year of investment, perhaps you didn’t see any losses. If so, good for you! If you did experience some losses, make sure you unload those at the end of the year. What does that mean? Unload your losing stocks, and you can write off the amount of the loss. However, if you decide to keep the losing stock, you will not be able to write off the loss in following years, so the best action tax-wise is to take action now.
#4 Know the Changes Coming in 2020 to Help With the Expat Tax Planning Process
2019 has been nothing if not a year full of changes for expat taxes. And more changes await expats in 2020. Some of the biggest changes include the six new IRS compliance campaigns that primarily affect expats, more stringent effort to revoke the passports of those who are late on their taxes, the massive refunds that will be given to Americans living in France, and the new IRS program that allows those who have renounced their citizenship easier ways to become tax compliant. And, stay tuned for updates on our blog because our accountants stay on top of expat news to give you up-to-the-minute briefings on what the future holds for expat taxes.
#5 Make Plans With Your Greenback Accountant
Keep your accountant in the loop of any major financial changes you’ve undergone and make plans to get your taxes done ASAP in 2020! There’s no feeling quite like not having to think about your taxes for the rest of the year.
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Editor’s note: This article was previously published on November 26, 2018 and updated on November 16, 2019.