US Expatriates’ Tax: A Look Ahead

US Expatriates' Tax: A Look Ahead

They say that change is the only constant, and that is undoubtedly true for US expatriates’ tax. With changes and proposed changes to American taxes developing almost daily, it’s more important than ever to stay on top of the latest changes to tax law. The IRS recently issued proposed regulations to GILTI (global intangible low-taxed income), and 2019 tax bracket projections are now available!

Projected 2019 Tax Brackets and Limitations

The Tax Cuts and Jobs Act has changed the way CPI (consumer price index) will be calculated by the IRS beginning in 2019, which can affect how much taxpayers can expect to pay next year. Due to the changes implemented by the Tax Cuts and Jobs Act, instead of using traditional CPI, the IRS will now use chained CPI, which measures consumer response to price changes, rather than simply the price changes themselves. So, the overall adjustments for inflation will be less. What does this mean? A higher CPI will push tax brackets up, and taxes due on income will decrease somewhat.

Bloomberg Tax’s full report suggests a significant increase to the standard deduction amounts. For taxpayers filing singly, the projected amount is $12,200 and for married filing jointly, $24,400. Bloomberg expects the maximum contribution limit for traditional and Roth IRAs in 2019 will increase to $6,000 for individuals under age 50 and $7,000 for those 50 and above. The passthrough deduction for business income and alternative minimum taxes are also subject to inflation, and the threshold amounts and exemption amounts will vary depending on that rate at which inflation is calculated. Further, the cost of depreciable business assets taxpayers are allowed to expense under section 179 is projected to double. And, though capital gains rates will not change, the thresholds between maximum zero and maximum 15% rates will change. See the full report here.

Keep in mind that the official 2019 numbers are not out yet. When they are published later on this year, we’ll give you an update as to what you can expect.

Section 951A GILTI Regulations Proposed by IRS

One of the major changes that the Tax Cuts and Jobs Act contained was the introduction of new rules that require the inclusion of global intangible low-taxed income generated by controlled foreign corporations (CFCs). The IRS has recently issued proposed regulations on GILTI. However, if you’re looking for light reading, look elsewhere – the massive document is 157 pages long! Part of the new rules require that Form 8892 be filed for those who own at least ten percent of the value or voting rights in one or more CFCs. What may come as a disappointment to expats is that the regs do not provide guidance on foreign tax credit computational rules that relate to GILTI. The IRS has promised to address this in the future – and when they do, we’ll give you the details on how this will affect US expatriates’ tax as well. However, the regulations did clarify that the Department of Treasury would permit multinationals to pay the tax for each subsidiary together, meaning companies that file a consolidated return will be handled in the same manner as single U.S. shareholders.

Want Help With Your US Expatriates’ Tax?

The experts at Greenback understand the many changes coming down the pike and can help you navigate these changes. Get started with Greenback today so that you are as prepared as possible for the future!

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