Understanding your US taxes can be complex, especially with the additional requirements you have as an expatriate. But imagine the complexity of tax reporting for frequent travelers who don’t spend a lot of time at home! US taxes for pilots and seafarers is no walk in the park, that’s for sure. But, knowing these requirements can go a long way toward making the process easier.
Keep Track of Time
One of the biggest challenges that professionals like pilots and seafarers face is determining how much of their time they spend outside the US. And further, defining what constitutes foreign income – money they earned while outside the states – is tricky as well. As you can imagine, crossing borders isn’t as easily defined when traveling by air or by sea. Additionally, the US government has said money made in or over international waters doesn’t count as foreign income. This means that individuals in these professions must carefully track their time spent in the US, international waters, and foreign countries.
Why Record Keeping Matters
Every taxpayer should keep track of relevant documents and information that they’ll need when preparing their taxes, but it’s especially crucial for those individuals who are more likely to get audited – such as expats or professionals with a tricky situation like a pilot or seafarer! If the IRS requested an audit of a pilot, for example, he or she would have to provide accurate information proving how much money they earned in the US and abroad – because the US requires all citizens to file US taxes, no matter where they live and earn an income.
Qualifying for the FEIE
In many cases, US citizens living as expats can qualify for the Foreign Earned Income Exclusion (FEIE). This allows you to claim up to$105,900 of foreign earned income from your 2019 US expat taxes and $103,900 from your 2018 US expat taxes, meaning you wouldn’t have to pay US taxes on that income. To do so, you must qualify for the Physical Presence Test or the Bona Fide Residence Test:
Physical Presence Test – Requires you to have spent 330 out of 365 days outside of the US.
Bona Fide Residence Test – Requires that you live in a foreign country for a full calendar year without intentions to permanently return to the US.
Generally speaking, a seafarer might easily meet the Physical Presence Test and therefore qualify for the FEIE, depending on where they spent most of their time. Likewise, a pilot who spends much of their time flying internationally might find that setting up residence outside the US benefits him or her when it comes to taxes.
US Taxes for Pilots and Seafarers: They’re up for Interpretation
In any instance, these tricky rules complicate US taxes for pilots, seafarers, and other frequent travelers. It’s essential to gain as much knowledge as you can about the rules and laws pertaining to your situation. And if you don’t feel qualified or don’t want to wrap your mind around the technicalities, that’s where a tax professional comes in. Having an expert guide you through the process can take a weight off your shoulders and ensure your bases are covered when it comes to your US taxes – which allows you to spend your time doing what you enjoy!
Are You a Pilot, Seafarer, or Other Professional with Specific Tax Questions?
Greenback can help! Our expat-expert CPAs and IRS Enrolled Agents have a wealth of tax knowledge, so if you’re ready to get started on your US taxes, we’re prepared to make it easy.
Editor’s Note: This was originally published in 2016 and was updated on December 30, 2019.