The Bahamas Taxes for US Expats in 2024
- Living as an Expat in the Bahamas
- Bahamas at a glance
- US Expat Taxes in the Bahamas
- Who Has to File Taxes in the Bahamas?
- Who Qualifies as a Tax Resident in the Bahamas?
- Other Tax Situations in The Bahamas
- Does the US Have a Tax Treaty with the Bahamas?
- Does a Bahamas-US totalization agreement exist?
- US Tax Forms for Expats in the Bahamas
- Are there US Tax Deductions for Americans in the Bahamas?
- Navigating Tax Compliance for US Expats in the Bahamas
Living as an Expat in the Bahamas
In the Bahamas, citizens enjoy a unique tax structure where there is no imposition of taxes on income, inheritance, gifts, or capital gains. This tax-friendly environment is sustained through alternative revenue sources such as Value-Added Tax (VAT) and stamp taxes.
Located in the West Indies and not far from Florida, the Bahamas are located in a chain of islands in the North Atlantic Ocean. This Caribbean country boasts tropical weather and warm, sandy beaches, making it an ideal spot for US expats to live and work. But, if you’re residing in the Bahamas, you should know how to handle Bahamas taxes for US expats.
Figuring how much you need to pay in expat taxes can be complicated — but if you’re living in the Bahamas, you don’t have to worry about paying income taxes in this country.
Bahamas at a glance
- Primary Tax Form for Residents: Annual Tax Return (Form BIR60).
- Tax Year: January 1st to December 31st.
- Tax Deadline: March 31st of the following year.
- Currency: Bahamian dollar (BSD).
- Population: Approximately 393,000.
- Number of US Expats: There is no official data available on the number of US expats living in the Bahamas.
- Capital City: Nassau
- Primary Language: English
- Tax Treaty: No
- Totalization Agreement: No
US Expat Taxes in the Bahamas
US expats living in the Bahamas only need to file their US tax returns and do not have to worry about filing a Bahamas tax return since the country does not impose an income tax on residents or non-residents. This tax-free status makes the Bahamas an attractive destination for US expats looking to reduce their tax bills.
However, US expats in the Bahamas must still comply with US tax laws, including reporting their worldwide income to the Internal Revenue Service (IRS) and filing required forms such as the Foreign Bank Account Report (FBAR) and Foreign Account Tax Compliance Act (FATCA). Failure to comply with US tax laws can result in penalties, interest, and even legal action.
US expats do not have to pay income tax to the Bahamas but are responsible for US income tax.
Learn where the best tax havens are, common traps, and ways to save money on your US expat taxes.
Who Has to File Taxes in the Bahamas?
In the Bahamas, only individuals and companies that earn an income within the country are required to file tax returns. If you are a resident or non-resident who earns income from a Bahamian source, you must file a tax return with the Bahamas government.
Individuals who are considered residents of the Bahamas for tax purposes are those who spend more than 183 days in the country during a calendar year or who establish a permanent home in the Bahamas. Non-residents who earn income from a Bahamian source are subject to a withholding tax on that income.
Who Qualifies as a Tax Resident in the Bahamas?
In The Bahamas, residents are taxed on all the income they make — regardless of if it was made in The Bahamas or internationally. However, non-residents are only taxed on the income they make in The Bahamas.
If you’re a US expat living in The Bahamas, you might be unsure whether you’re considered a resident or non-resident of the country. Here’s how you can find out:
The Bahamas Resident Qualifications
While residents of the Bahamas are often born in the country or obtain residence through marriage, there are a few other ways to become a resident.
US expats with clean criminal records can become permanent residents of the Bahamas through investment. Expats have two options: they can either buy property in the Bahamas or invest in various sectors of the country’s economy, such as medicine or tourism.
According to the official website of the government of the Bahamas, expats must make a minimum capital investment of BSD $500,000 to qualify for permanent residency. However, the Bahamas Immigration website also notes that “persons purchasing a residence for BSD $750,000.00 or more will get speedy consideration” when it comes to their application.
(For reference, the Bahamian dollar is pegged to the US dollar).
Other supporting documents you’ll need for your permanent residency include copies of your passport, proof of financial capability, and character reference. You’ll need to spend at least 90 days in the Bahamas per year to maintain your permanent residency.
In addition, there are certain jobs you can work, such as a teacher, nurse, doctor, or other medical professionals, for 10 years in the Bahamas to qualify as a resident.
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Other Tax Situations in The Bahamas
Self-employment Tax
If you’re self-employed and working in the Bahamas, you’ll pay a rate of 8.8% into the country’s Social Security insurance.
Capital Gains Tax
There is no capital gains tax in the Bahamas.
Corporate Tax
Companies operating in the Bahamas must pay a flat corporate tax rate of 15% on all taxable profits.
Value-added Tax (VAT)
In the Bahamas, you pay value-added tax for certain goods and services, and the VAT tax rate is 10%.
Wealth Tax
There is no wealth tax in the Bahamas.
Inheritance Tax
There is no inheritance tax in the Bahamas.
Property Tax
The property tax rate in the Bahamas ranges depending on the property’s price. The first $250,000 spent on the property is tax-exempt. The next $250,000 to $500,000 is taxed at 0.625%, and properties over this amount are taxed at 1% (but capped at $5,000).
Social Security
In the Bahamas, you contribute 3.4% of your salary to Social Security tax. Your employer contributes 5.4% of your wages to Social Security.
Does the US Have a Tax Treaty with the Bahamas?
Although the US has tax treaties with many countries to help avoid double taxation, the Bahamas and the US do not currently have a tax treaty agreement.
Does a Bahamas-US totalization agreement exist?
The Bahamas does not currently have a totalization agreement with the US. Since a totalization agreement helps protect US expats from paying duplicate Social Security taxes, this means Americans living in the Bahamas must contribute to both US and Bahamas Social Security funds.
US Tax Forms for Expats in the Bahamas
IRS Form 1040: Individual Income Tax Return
The standard income tax form in the US is Form 1040. All US citizens and resident aliens must file their 1040 annually, even if they’re living in a foreign country like the Bahamas.
Typically, taxpayers must file Form 1040 by April 15th. However, the IRS automatically extends the due date to June 15th for expats. Taxpayers can also request a further extension to October 15th.
IRS Form 8938: Statement of Specified Foreign Financial Assets (FATCA)
You may need to file a FACTA, depending on your financial situation. In the US, you must file a FACTA if the amount of your foreign financial assets exceeds a specific threshold ($200,000 for single filers and $400,000 for those married, filing jointly).
To file your FACTA, submit Form 8938, and send it in with your 1040. Your FACTA is due by April 15
FinCEN Form 114: Report of Foreign Bank and Financial Accounts (FBAR)
US citizens living in the Bahamas who held $10,000 or more in one or across multiple foreign bank accounts over the past tax year must also submit FinCEN Form 114, the FBAR.
You can file this form online at the FinCEN BSA e-filing platform. To mail a paper copy instead, you must contact FinCEN’s resource center and request an e-filing exemption. If approved, you’ll receive a physical form to mail back.
Your FBAR is due on April 15. If you need more time to file your FBAR, the deadline automatically extends to October 15 without penalty.
Are there US Tax Deductions for Americans in the Bahamas?
The US offers tax deductions; American expats can file to lower their tax bills. However, since expats living in the Bahamas do not pay income tax, you likely won’t be able to take advantage of some of these tax breaks.
Foreign Earned Income Exclusion
You can lower your taxable income in the US taxable income with the Foreign Earned Income Exclusion (FEIE). This tax break lets you deduct all or some of your foreign-earned income from US taxation.
For the 2023 tax year (filed in 2024), you can exclude up to $120,000 in foreign-earned income from your US taxable income. So, if you earned less than this number in 2023, you could cancel your US tax bill altogether.
You can claim the Foreign Earned Income Exclusion by filing IRS Form 2555.
Foreign Tax Credit
The Foreign Tax Credit (FTC) is another tax break designed to help expats — however, Americans in the Bahamas likely won’t qualify for this credit. This tax break lets you deduct any income taxes you’ve already paid or will pay to the Bahamas, dollar for dollar, from your tax bill.
Since expats in the Bahamas don’t pay income tax in the Bahamas, however, they won’t qualify for this benefit.
Foreign Housing Exclusion
You can also deduct eligible housing-related expenses from your US tax bill by claiming the Foreign Housing Exclusion.
You can only claim this credit if you also claim the Foreign Earned Income Exclusion. Both can be claimed on Form 2555.
Navigating Tax Compliance for US Expats in the Bahamas
We hope our tax guide has provided valuable insights into the Bahamas’ taxes for US expats. We understand that tax compliance can be complex, and if you have any further questions, our team is always here to help. Don’t hesitate to reach out to us for expert guidance and support.
Contact us, and one of our customer champions will gladly help. If you need very specific advice on your specific tax situation, you can also click below to get a consultation with one of our expat tax experts.
