The sharing economy has forever changed the way resources are used; owning has taken a back seat to renting for many American taxpayers. There’s almost nothing you can’t share anymore from a vacation home, to a ride to work, to your skills on freelance sites, to fancy clothes and appliances. A combination of minimalism and ingenuity has led to the collective realization that owning something is often more of a headache than just borrowing it. What’s great is that this brings a new level of accessible goods and services to people of varying income levels; what’s not as great is the complicating effect it can have on your US expat taxes.
The Sharing Economy and the Associated Taxes Can Impact US Expat Taxes
The sharing economy is now such a large part of the global economy that the IRS has a whole page full of tips for those who are involved in one of the many burgeoning sharing industries. Participating in the sharing economy can result in taxable events, meaning you triggered a tax-filing requirement. So, if you’re a rideshare driver on the side, the money you make is taxable even if the activity is only part-time, not your main gig, the payments are in cash, and you receive an information return such as Form 1099 or Form W2.
Rental income can be tricky to report, and the tax treatment depends on your personal use of the property as well. Check out our free, thorough guide to real estate investment for expats if you want to know how to avoid the most common tax mistakes when it comes to buying and renting an overseas property.
You May Be Required to Submit Estimated US Expat Taxes
Those participating in the sharing economy may not have an employer who withholds taxes from each paycheck. Since the US taxation system operates on a pay-as-you-go basis, you may need to submit estimated taxes quarterly in order to avoid the estimated tax penalty. The deadlines for submitting estimated taxes are:
- For taxes incurred from January 1 to March 31, the deadline is April 15
- For taxes incurred from April 1 to May 31, the deadline is June 15
- For taxes incurred from June 1 to August 31, the deadline is September 15
- For taxes incurred from September 1 to December 31, the deadline is January 15 of the following year
Ways to Reduce Taxes Incurred From Sharing Goods and Services
If you have another job in addition to the income you receive from your sharing economy gig, sometimes you can avoid paying estimated taxes by increasing your main withholding or, for those married filing jointly, having your partner increase their withholding.
But don’t forget: some of the business expenses you incur may be deductible, so check with the experts before filing. For instance, the ordinary and necessary expenses listed below may be deducted by using Schedule C:
- Legal and professional services
- Car expenses
- Rent, including both business space and equipment
- Taxes and licenses
- Meals and entertainment
Have Questions About Your US Expat Taxes and the Sharing Economy?
Greenback experts are ready to answer them. Contact us today, and you’ll receive the most accurate, current information available!