With the 2011 tax year coming to a close, the IRS has released some pieces of expat tax advice regarding tax savings tips to take advantage of before the year comes to an end. These tips are valuable for any taxpayer, but some of them are particularly good pieces of expat tax advice for Americans living overseas.
Expat Tax Advice: Make Charitable Contributions
While not all international charities are eligible, you are able to make charitable donations to IRS approved charities in order to increase your total deductions. Note that making these contributions will require that you file Schedule A with your expatriate tax return in order to itemize your deductions rather than taking the standard deduction.
“If you itemize deductions, your donations must be made to qualified charities no later than Dec. 31 to be deductible for 2011. You must have a canceled check, a bank statement, credit card statement or a written statement from the charity, showing the name of the charity and the date and amount of the contribution for all cash donations. Donations charged to a credit card by Dec. 31 are deductible for 2011, even if the bill isn’t paid until 2012. If you donate clothing or household items, they must be in good used condition or better to be deductible.”
Make sure that any donations you would like to make are both well recorded and made before the December 31st deadline as mentioned above.
Expat Tax Advice: Evaluate Your Portfolio
The IRS allows taxpayers to deduct capital losses from the total amount of capital gains, plus up to $3,000 from other income. You should evaluate your portfolio to make sure that any losses are deducted from other capital gains or income earned in the 2011 tax year.
“Check your investments for gains and losses and consider sales by Dec. 31. You may normally deduct capital losses up to the amount of capital gains, plus $3,000 from other income. If your net capital losses are more than $3,000, the excess can be carried forward and deducted in future years.”
Worldwide capital gains are required to be reported with the IRS and are also eligible for the deductions. As a reminder, if you have more than $10,000 in bank or financial accounts overseas, all of these accounts must be reported with the US Department of the Treasury by June 30th of the following year with FBAR Form TD-F 90-22.1.
Expat Tax Advice: Retirement Accounts
While immediate action is not required, you are able to deduct contributions to an employer-sponsored 401(k) plans or similar retirement plans for 2011 if the deductions have been made by April 17th, 2012.
“Elective deferrals you make to employer-sponsored 401(k) plans or similar workplace retirement programs for 2011 must be made by Dec. 31. However, you have until April 17, 2012, to set up a new IRA or add money to an existing IRA and still have it count for 2011. You normally can contribute up to $5,000 to a traditional or Roth IRA, and up to $6,000 if age 50 or over. The Saver’s Credit, also known as the Retirement Savings Contribution Credit, is also available to low- and moderate-income workers who voluntarily contribute to an IRA or workplace retirement plan. The maximum Saver’s Credit is $1,000, and $2,000 for married couples, but the amount allowed could be reduced or eliminated for some taxpayers in part because of the impact of other deductions and credits”
Living as an expat can make retirement planning difficult; why not take advantage of the opportunities this tax year to get the ball rolling on your retirement plans?
More Expat Tax Advice
Have a look at our post on our top four expat tax advice tips for saving money. If you have any other questions or would like to learn about our expat tax services, please contact us.