US expatriate taxes can be downright confusing – it’s true. Sometimes it’s hard to separate facts from myths, though, when you’re trying to understand your US tax obligations. That’s why we’re highlighting three big myths that might help you when it comes to your expat tax situation. Read on for details.
1 – I must file a Federal Tax Return, regardless of where I live.
Myth (sort of!). If you don’t earn the minimum amount required to file, then you don’t have to file US expatriate taxes. The minimum amounts are currently:
|Filing Status||Minimum Amount|
|Head of Household||$13,350|
|Married Filing Jointly||$20,700|
|Married Filing Separately||$4,050|
However, many expats find it useful to file a Federal Tax Return as it can help you in the event of an audit, for future tax deductions, refunds from tax credits and when qualifying for certain programs (like financial aid for college). Whether or not you choose to file is up to you, if you’re below the thresholds above – but be sure you consider scenarios where having a record of tax filing might be helpful!
And don’t forget, if you exceed the thresholds listed above for your filing status, you must file a US Tax Return – regardless of where in the world you may be living. You can find more specifics about filing expat taxes in our tax guide for Americans working overseas.
2 – As an American living abroad, I’m automatically eligible for the Foreign Earned Income Exclusion.
Myth. Not so fast! While most US expats are able to use the Foreign Earned Income Exclusion (FEIE) to save on US expatriate taxes, you must qualify in order to do so – which means you’ll have to meet one of the following requirements:
- Physical Presence Test: You must live in a foreign country for 330 out of a 365-day period
- Bona Fide Residence Test: You must live abroad for at least a year, have no intention of returning to the US permanently and must show that you’ve established residency in your host country.
If you qualify using one of the tests above, you will be able to exclude up to $101,300 of foreign earned income from your 2016 US expatriate taxes (and $102,100 from 2017 taxes). If you are married and your spouse also works, he or she can also exclude up to $101,300 from taxes. Learn more about saving money on your expat taxes here.
3 – If I’m married, my spouse and I can file a single FBAR to report our foreign financial accounts.
It depends! This truly depends on your situation. If your spouse files an FBAR for a joint account, you won’t need to file a separate FBAR if the following conditions are met:
- All of the financial accounts that the non-filing spouse is required to report are jointly owed with the filing spouse.
- The filing spouse reports the jointly owned accounts on a timely-filed FBAR.
- Both spouses/filers have completed and signed Form 114a, Record of Authorization to Electronically File FBARs.
If you do not meet the criteria above for filing a single FBAR, you, your spouse and anyone else in your family with over $10,000 in foreign financial accounts (across one or more accounts) will need to file separate FBARs.
This year, the FBAR deadline has changed to fall in line with the US tax deadline, which means for US expats, it will be due June 15th along with your US expat tax return. This year, there is also an automatic extension until October 16th for all Americans, as a way to help everyone acclimate to the new deadline.
Ready to Get Started on Your US Expatriate Taxes?
When you’re ready to begin preparing your taxes, our team of expat-expert CPAs and IRS Enrolled Agents are standing by to help make filing your expat tax return a hassle-free experience. Get started with us today so you can cross taxes off your to-do list ahead of the June 15th deadline!