Itemizing Deductions on Your US Expat Tax Return

US Expat Tax Return and Itemized Deductions

With the impending expat tax deadline, chances are you’ve been wrapping up your US expat tax return or preparing to file an extension to give you more time to file. If you’re in the latter category, you may still need to determine whether you should file for the standard deduction or itemize your deductions to reduce your taxable income. Here are a few things to think about when considering the best option for your tax situation.

What are the Differences?

Expat taxes can be complex enough, but don’t forget to calculate whether it will be more beneficial for you to take the standard deduction or itemize your deductions instead. The IRS determines the standard deduction, and it varies yearly and correlates with your filing status. Itemizing deductions can be more work-intensive, but may lead to bigger tax savings on your US expat tax return. It’s important to determine which option will provide the most benefit to you when it comes time to prepare your US Tax Return.

Standard Deduction

The most recent standard deductions are as follows:

  Filing Status      
Year Single Married Filing Jointly Married Filing Separately Head of Household
2017 $6,350 $12,700 $6,350 $9,350
2016 $6,300 $12,600 $6,300 $9,300
2015 $6,300 $12,600 $6,300 $9,250
2014 $6,200 $12,400 $6,200 $9,100

Itemized Deductions

Itemized deductions fall into specific categories, and have the potential to add up to a bigger savings on your US expat tax return than the standard deduction if you have expenditures in the following categories:

  • Medical and dental expenses – These include things like expenses paid for doctors, hospitals, prescriptions, medical insurance (paid for with after-tax dollars), and even mileage incurred to receive medical treatment. You can deduct the amount of expenses that exceeded 7.5% of your adjusted gross income (AGI). Because this percentage is quite high, many people aren’t able to take this deduction.
  • Taxes paid – This includes state and local taxes paid during the calendar year. You can choose a deduction for state income taxes paid or the general sales tax attributable to your state. Typical deductions include real estate taxes and personal property (vehicle) taxes.
  • Interest paid – If you’re a homeowner, this is a big deal – since this includes mortgage interest, it can sometimes be advantageous to itemize if you own a home. You can also deduct mortgage insurance premiums and points associated with mortgages. Also included: the deduction of investment interest on US taxes for expatriates.
  • Charitable gifts – Donating to charity can add up in terms of itemized deductions, but the caveat is, your donations must be made to a ‘qualifying organization.’ This means it must be organized and created under the laws of the US – though, it’s worth mentioning that Canada and Mexico have treaties with the US that allow deductions for contributions made to certain Canadian and Mexican charities. Also, you can take deductions for non-cash contributions, but reporting requirements become more complex for donations over $500.
  • Casualty and theft losses – If you faced loss to your property due to casualty, disaster or theft, you will be able to take a deduction for the loss. This includes property such as your home, household items and vehicles. The process can be quite complex, and you have to complete a special tax form (Form 4684) in order to support the claim. Learn more about this type of deduction on the IRS website.
  • Job expenses – Certain unreimbursed expenses related to your job may be deductible in this category. It also allows you to deduct your US expat tax preparation services, in addition to other things like expenses incurred to earn taxable income (investment expenses, safety deposit boxes, etc.). Note that you must total these expenses, and only the amount that exceeds 2% of your adjusted gross income can be deducted.
  • Other miscellaneous deductions – This category contains a variety of deductible expenses, such as gambling losses, losses from partnerships, unrecovered pension investments, and impairment-related work expenses for a disabled person.

The most important thing you can do throughout the year is maintain an accurate record of all of your expenses, in the event you choose to itemize your deductions. Consulting with a tax professional for help with your US expat tax return is also recommended to help you find the most savings possible. Be sure to download a US expat tax guide for more money-saving tips and important tax information.

Still Need to File Your US Expat Taxes?

Get started with our team of expat-expert accountants today and we’ll help you file an extension request, so you will have more time to complete your US expat tax return. Don’t wait any longer, as extensions must be requested by June 15th!