How to Maintain a US Address While Living Abroad
If you are planning a move abroad, it’s important to understand US residency rules. Maintaining a US residency—or choosing not to—can have a major impact on your expat taxes. Here’s what you need to know about retaining a permanent US address as a US citizen living abroad.
Keeping a US Address While Living Abroad
Even when living overseas, maintaining a permanent US address can offer several benefits. For example:
- Having a US address can help ensure that you receive mail from the IRS or other important senders in a timely fashion.
- Many US financial institutions require you to provide a US address (not just a PO Box) to open an account. If you have no US address, you could lose access to your US bank accounts and credit institutions.
- If you move often, perhaps as a digital nomad, having a single point of contact in the US makes it easier for people to reach you when necessary.
For these reasons, many expats choose to maintain a US mailing address even after moving abroad.
What Address Should US Expats and Digital Nomads Use on Their Tax Returns?
For many Americans living abroad, the question of what address to enter on a tax return arises. At first, the answer seems obvious: shouldn’t you use the address where you will live overseas? In many cases, yes. But it isn’t always that simple.
The address on your tax return should be a place where you can easily and quickly receive any correspondence the IRS needs to send to you. But what if the mail system is slow or unreliable in your country of residence? What if you expect to move again before you file your next expat tax return? In these cases, it may be better to maintain a mailing address in the US.
It should be noted that the address you use on your tax return will not directly impact your eligibility for the Foreign Earned Income Exclusion (FEIE). However, owning property in the US could be a complicating factor if you use the bona fide residence test to qualify. (More on this below.)
How to Maintain a US Address
If you choose to maintain a US address while living abroad, there are several ways to accomplish this. Let’s look at some of the simplest options.
1. Virtual Mailbox
Some expats use a virtual mailbox to maintain a US address. For a monthly fee, you receive a personal, non-PO Box mailing address. When mail is sent to your virtual mailbox address, you are alerted via email. Then, the mail is scanned or forwarded to you.
Some services will scan the first page and email it to you so that you can choose whether to “open” the rest of it. This is helpful since the fee may be based on the number of “openings.”
Using a virtual mailbox means you will have instant, reliable access to your US mail and can maintain a US address (and US bank accounts) while living abroad. For many expats, these benefits are well worth the minor monthly fees.
When choosing an address for your virtual mailbox, it’s best to opt for a state that does not have an income tax, such as Florida or Texas. Having an address in a state that does levy income tax may result in that state auditing you because they mistakenly think you should be filing tax returns with them.
2. Friends and Family
While virtual mailboxes are a popular option, some expats use the address of a friend or relative in the US instead. But beware: if that address is in a state with an income tax (which is the majority of states), the state tax authority may require you to file a state tax return—even if you’ve never actually lived in that state yourself.
Resolving the matter by proving your non-residence in that state can be a time-consuming and frustrating task. “Sticky states,” like California, New York, New Mexico, and Virginia, will make this process even trickier. State residency laws vary by state, so make sure you know the rules before choosing your US mailing address.
3. Keeping Your US Residence
Another possible method for maintaining a US address while living abroad is to simply retain ownership of your home in the United States. This not only ensures the continuity of your US address but it also allows you to have a physical base when you return for visits.
However, maintaining a residence in the US does create potential complications. You’ll likely need to take care of ongoing expenses such as property taxes, insurance, and regular maintenance. You may also need to consider security measures or hire a property management company to keep an eye on the place while you’re overseas.
Weighing these costs and responsibilities against the benefits will help you decide if maintaining your residence is the right choice for your situation.
Tax Implication of Keeping a US Home While Living Abroad
Owning property in the US while living abroad can affect your expat taxes. This is especially true if you are planning to claim the Foreign Earned Income Exclusion.
If you use the physical presence test to qualify, keeping your home in the US won’t matter. However, if you use the bona fide residence test, you may have to state your reason for owning US property. This is because the bona fide residence test mandates that you must not have any plans to return to the US in the future. Retaining ownership of US property could be viewed as evidence that you are planning to return at some point.
This is true even if you choose to rent out your US home while living abroad. The IRS may review the details of the rental property when assessing your intention to return to the US. Once again, your ownership could be used against you when claiming bona fide residence.
Rental property also brings a host of other tax considerations separate from the Foreign Earned Income Exclusion. To learn more, check out our guide on rental property taxes for expats.
Still Have Questions About Maintaining a US Address?
We hope this guide has helped you understand how to maintain a US residence while living abroad! As a US citizen living abroad, your permanent address will have a major impact on your taxes. If you still have questions, we have answers!
At Greenback Expat Tax Services, we specialize in helping Americans around the globe manage their expat tax returns. Our dedicated CPAs and IRS Enrolled Agents are here to take the hassle out of your tax season!
Get started with us today and cross taxes off your to-do list ahead of schedule!
Use our simple excel calculator to get an estimate of how the foreign earned income exclusion will save you money. It will make your day!