Expat Taxes and Your Life Abroad: Picking the Best Country for You

Expat Taxes and the Effects of Living Abroad

If you’re planning to move abroad, chances are, you’ve either secured work overseas or you are in the process of researching the best area to live as an expat. Moving abroad means different things for different people, and where you end up living will impact not only your everyday life, but your finances and US expat taxes, as well. HSBC’s annual Expat Explorer Survey has uncovered some interesting revelations, which we’ll discuss below.

Why People Choose the Expat Lifestyle

It’s very common for people to move abroad for their job, but it’s also extremely common nowadays for people to choose the expat life simply for the experience and immersion in a new culture. In fact, 52% of expats surveyed in HSBC’s annual survey said they see an improvement in their quality of life due to moving abroad and 61% said they are integrating well with the local culture and residents. For the second year in a row, New Zealand and Spain are the top two countries expats move to for an improved quality of life, due to the ease of integrating into the culture as well as organizing their business and personal affairs in the country.

Choosing to expatriate from your home country is a choice not to be taken lightly, but it can provide a huge reward for you (and your family, too) if you move to the country that fits your lifestyle. And, if you find that a country isn’t the best fit, there’s always the opportunity to relocate somewhere new – life abroad is always an adventure!

How it Affects Your Finances

Depending on the country to which you relocate, there are a number of ways your finances may be affected. Generally speaking, moving abroad can help fast track reaching your financial goals – 29% surveyed say expat life has helped them save more quickly for their children’s education and 40% say moving abroad accelerated their retirement saving.

Living in an area with a lower cost of living than what you experienced back home is key when it comes to saving more and improving your financial situation. Also, moving abroad for a higher-paying job can help quite a bit when it comes to reaching your financial goals (and it can help with US expat taxes, but more on that below!). In fact, 56% of expats in Hong Kong and Switzerland and 55% of expats in Singapore say that moving to a larger financial hub has helped them build long-term savings and investments at a quicker pace.

With the sky-high price of real estate in many large US cities, Americans living abroad might find themselves more able to purchase real estate in their host country. Over half of expats in Canada and 46% in Australia stated they are able to buy property more quickly than they would have been able to at home. But, if you intend to invest in real estate overseas, don’t forget to learn more about how buying and selling real estate abroad can affect your US expat taxes!

US Expat Tax Return and Saving Money

The US taxes all citizens of their worldwide income, regardless of where they may be living at the time. This means that you will need to file a US Tax Return even if you are living it up and enjoying new experiences in a foreign country. You may also be required to file taxes in your host country, but fortunately, the IRS does provide several provisions that help protect you from double taxation on your US expat taxes, including:

Foreign Earned Income Exclusion: This allows you to exclude up to $101,300 of foreign earned income from your 2016 US taxes and $102,100 from your 2017 US taxes.

Foreign Tax Credit: This allows you to offset taxes paid in your host country with your US expat taxes on a dollar-for-dollar basis.

Foreign Housing Exclusion: This allows you to exclude certain household expenses that occur as a result of living abroad.

If you’re in the planning stages of moving abroad, be sure to do your research regarding US expat taxes and taxes in your host country so you’ll be prepared when tax time rolls around. To learn more about expat taxes and ways to save, download our tax guide for Americans working overseas.

Need Help Filing Your US Expat Taxes?

Our team of expat-expert CPAs and IRS Enrolled Agents are here to help make the process of filing expat taxes a more hassle-free process, so you can get back to your adventure abroad. Get started with us today!

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