This article was first published on January 11, 2012. It was updated on June 17, 2014, with information relevant to the 2013 and 2014 tax years.
How good is your CPA? Are you sure he or she is an expat CPA?
Hiring an expat CPA who is familiar with the deductions and exclusions applicable to US expatriate tax returns is important as these mechanisms are in place to help avoid dual taxation when taxes are paid to a foreign government. These IRS tools can save you big!
The main deductions on US expat taxes that many expat CPAs overlook include the Foreign Earned Income Exclusion and Foreign Housing Expense, both of which are filed via Form 2555 and attached with your Form 1040 on your US expatriate tax return. The Foreign Earned Income Exclusion permits expats to exclude up to $97,600 of their 2013 foreign earned income and $99,200 of their 2014 foreign earned income. The Foreign Housing Expenses allows the deduction of applicable housing expenses related to having a residence overseas.
Another important credit to apply to an expatriate tax return is the Foreign Tax Credit, which allows you to reduce your US tax liability on a dollar-to-dollar basis to compensate for taxes paid to another country.
If your expat CPA is not aware of these deductions and credits, you could end up having a higher tax liability.
This is exactly what happened to Khrisslyn G., a resident of the United Kingdom. Her previous expat CPA was not familiar with the Foreign Housing Exclusion; considering that Khrisslyn’s income package included room and board as part of her remuneration, this was a big concern and cost Khrisslyn significant money when it came time to file taxes.
Eventually, Khrisslyn found the expat CPAs at Greenback Expat Tax Services. We were able to identify how she could reduce her tax liability by deducting this from her income earned, which translated into significant tax savings. Having a qualified expat CPA pays off!
Need Help From an Expat CPA?
Have a look at our “US Expat Taxes Explained” series to see where an expat CPA could save you money. If you have any questions about the Foreign Earned Income Exclusion or other expat deductions or credit, or if you would like to learn about our expat tax services, please contact us.