Tax-Savings Opportunities on Expats Taxes

Taxes for Americans in Canada

This article was first published on November 23, 2012. It was updated on June 19, 2014, with information relevant to the 2013 and 2014 tax years.

What You Should Know About Expats Taxes

As a US expat, you may not be aware of all the tax-savings opportunities available to you when filing your US expat taxes. There are significant benefits to be had. Accounting for all of your available deductions, exclusions, and credits will reduce the amount of taxable income you may have on your US expat taxes.

Foreign Earned Income Exclusion and Other Opportunities

As an American living abroad, the IRS has created several opportunities to help US expats avoid dual taxation. The most important include:

  • The Foreign Earned Income Exclusion, which allows you to decrease your 2013 taxable income by the first $97,600 earned as a result of your labors while a resident of a foreign country (and $99,200 on your 2014 taxable income),
  • The Foreign Tax Credit, which could allow you to lower your tax bill on your remaining income by certain amounts paid to a foreign government, and
  • The Foreign Housing Exclusion, which allows an additional exclusion from income for certain amounts paid for household expenses that occur as a consequence of living abroad.

Miscellaneous Deductions for US Expat Taxes

In addition, US expats can deduct the amount of certain miscellaneous expenses that exceed two percent of their adjusted gross income. Some of those deductions include:

  • Unreimbursed employee expenses such as searching for a new job in the same profession, certain work clothes and uniforms, work tools, union dues, and work-related travel and transportation; and
  • Certain investment fees and expenses, some legal fees, hobby expenses that are not more than your hobby income rental fees for a safe deposit box if it is not used to store jewelry and other personal effects.

Deductions not subject to the two percent limit include:

  • Casualty and theft losses from income-producing property such as damage or theft of stocks, bonds, gold, silver, vacant lots, and works of art;
  • Gambling losses up to the amount of gambling winnings;
  • Impairment-related work expenses of persons with disabilities; and
  • Losses from Ponzi-type investment schemes.

There are also many expenses that you cannot deduct, such as personal living or family expenses. You can find more information and examples in Publication 529, Miscellaneous Deductions.

To report qualified miscellaneous deductions, you’ll need a Schedule A, Itemized Deductions. It’s important to keep records of your miscellaneous deductions throughout the year as you prepare the filing requirements for your US expat taxes.

Need Help With Your US Expat Taxes?

One other important consideration for your US expat taxes is the FBAR, which goes to the Treasury Department. If you have any questions about your US expat taxes or FBAR requirements, or if you would like to learn about our expat tax services, please contact us.