Key Updates: Us Tax for Expats Reporting Foreign Income in 2012

In this brief video, Greenback Expat Tax Services President and CEO David McKeegan points out some of the key changes to US tax for expats who are reporting foreign income on their US taxes for the 2012 and 2013 tax years. Updates are included at the bottom with information relevant to the 2013 and 2014 tax years.


Hi everybody, this is David McKeegan from Greenback Expat Tax Services. I wanted to speak to you today about some of the changes that are going to impact your 2012 taxes and some of the changes that you’ve probably heard about in the news that are going to impact your 2013 taxes, which you’ll file in 2014.

We’ll start with the good news, the Foreign Earned Income Exclusion has increased to $95,100 up from $92,900. On your 2012 taxes, which you file in 2013, you get a bit more breathing room there.

Now some of the things you’ve probably heard about with the fiscal cliff and all the tax changes that the government’s been putting through. A bit of that could be confusing, so let’s just run through some of it right now. The first thing is that the top tax rate has gone up, it’s now 39.6%, that’s up from 35%.

If you’re a high-income earner, that may have an impact on you. The next thing you want to know is that the capital gains rate has gone up. If you are in that 39.6% bracket, you’re going to be in a 20% capital gains bracket. Again, if you’re a high-income earner and you’ve got lots of capital gains, this is going to impact you.

The next thing to note is for anybody that’s self employed, the payroll tax holiday is over. Your payroll taxes are going to go up by 2%, so if you’re self employed, you pay both the employer and employee portion of the payroll taxes and that’s going up by 2%. That’s going to have an impact on you this year, that’s on income up to $113,700.

The last thing I want to mention, which you may have heard about in the news, is that your personal exemption and your itemized deductions may be going down. Again this is for high-income earners, so if you’re single, married filing single and you earn over $250,000 or if you’re married filing jointly earning over $300,000, these exemptions are going to be phased out for you and could have a negative impact on your taxes.

Note that this is your adjusted gross income, so your income has to be over $250,000 plus the Foreign Earned Income Exclusion in order for this to really have an impact on you.

As always, if you have any questions, please feel free to get in touch and thanks for watching.

Updates: Foreign Earned Income Exclusion rises to $97,600 in 2013, and $99,200 in 2014.

Need Help Reporting Your Foreign Income?

For more in depth information, you can refer to our blog post on this topic, too. If you have questions about reporting foreign income or if you would like help completing your US expat tax return, please contact us.