Top Questions About Filing Taxes Abroad

Ask Dave- Top US Expat Questions

In this week’s edition of “Ask Dave”, we take a closer look at Obamacare, taking a treaty-based position and a very common question about whether an expat needs to file a US tax return if their income is less than the Foreign Earned Income Exclusion.

Question: How do I qualify for an exemption to Obamacare if I move abroad mid year?? Will I face the ACA penalty? – Kyle M., Australia

Answer- Thanks for your question, Kyle!

In order to be exempt from Obamacare you would need to qualify as an expat via the Physical Presence test (330 days abroad in any 365 day period). Fortunately you can have a ‘gap in coverage’ for up to 3 months each year without penalty.

So for 2014, let’s say you moved September 1. Even though you will not be abroad the full year, you would have a 3 month grace period. As such, you would only be charged the tax for one month (which is minimal). In 2015, if you remained overseas long enough to qualify as an expat, you won’t be charged anything on your 2015 taxes. If you move back to the US during the year (2015), you have 60 days penalty-free to find a policy, as this is considered a qualifying event to obtain new coverage. If you move back before qualifying as a US expat, you will be assessed a tax for each month in 2015 you were uncovered (after the acceptable 3-month gap has been met).

In 2014, that $95 is the yearly tax. It is calculated monthly (i.e. $7.91 per month) however it is important to note that the tax is the GREATER of $95 per adult or 1% of income so most folks will end up paying a higher tax. Simply making $45,000 would include a $450 penalty if uncovered the whole year!

In 2015, the income percentage increases to 2 percent of household income and the flat dollar amount increases to $325 per adult ($162.50 per child under 18). In 2016, these figures increase to 2.5 percent of household income and $695 per adult ($347.50 per child under 18). After 2016, these figures are expected to increase with inflation.

Hope this helps!


Do I need to file a Treaty Based Return position? How does Form 8833 work? – Colin A., Ecuador


Hello Colin, thanks for getting in touch! With regards to your message, I will say that generally, most expats do not need to claim a treaty based position. For many of our clients, either the Foreign Tax Credit or the Foreign Earned Income Exclusion is sufficient to eliminate any tax liability (thus the Treaty based position would not be needed).

Of course, if you are working with us and your accountant sees a part of the treaty that may benefit you, they will let you know. You can make the choice at that time to apply it, which would require you to file Form 8833.

This article more fully explains how the Form 8833 works and if it may be needed when filing taxes abroad.

Question: I made less than $99,200 in 2014. Since I can technically eliminate all of my income from US taxation, do I still need to file a US tax return? – Albert R., Brazil


Hi Albert! Unfortunately, yes, you are still required to file. Ultimately it doesn’t matter how much (or how little) you make in a year. If you are a US citizen, you are required to submit a US Federal Tax Return each year.

Remember, you can only use the Foreign Earned Income Exclusion to offset your income if you prove eligibility by passing either the Physical Presence test or the Bona Fide Residence test. So simply because your income is less than the exclusion doesn’t automatically ensure you won’t have any US tax liability. You will still need to file a US tax return regardless.

Need help filing taxes abroad?

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