A Comprehensive Guide to Georgia Taxes for US Expats

A Comprehensive Guide to Georgia Taxes for US Expats

Are you one of the thousands of Americans working in Georgia or an established resident in this intercontinental nation? If so, it’s critical that you make yourself familiar with the relevant Georgia taxes for US expats. 

Regardless of whether you’re a resident or just a long-term employee working in Georgia, you’ll be required to file taxes in your host nation each year. You’ll also need to file taxes in the United States to avoid incurring any penalties with the IRS.

While nobody likes filing taxes once, much less twice. The good news is you can simplify the process of completing your expat taxes by familiarizing yourself with various applicable laws and programs.

On that note, here’s everything you need to know about Georgia taxes for US expats. 

The Intercontinental Destination Attracting Thousands of Expats

Georgia is known as an intercontinental nation because it’s located at the border of two continents, Asia and Europe.

The country is well known for its Black Sea beaches, Caucasus Mountains, and centuries-old culture. Georgia also has straightforward tax laws, making it a popular destination for expats looking for scenic views and a simple, stress-free life. 

A Quick Look at Georgia

Here are a few interesting facts about Georgia and its tax system:

  • Date Primary Tax Form Is Received: Immediately after end of calendar year
  • Tax Deadline: March 31st
  • Currency: Georgian Lari
  • Population: 3.709 million
  • Number of US Expats in Georgia: Approximately 10,000 or less
  • Capital City: Tbilisi
  • Primary Language: Georgian
  • Tax Treaty: No
  • Totalization Agreement: No

Like the US tax year, the Georgian tax year runs from January 1st until December 31st. Since the tax years align, expats should begin preparing tax documents for each return at about the same time each year. 

While the tax years align, the filing deadlines do not. Georgia’s tax deadline falls on March 31st each year, whereas the US tax deadline typically falls on April 15. Therefore, Georgia expats should prioritize filing their Georgia returns before their US returns.

Pro Tip

As an expat, you’ll receive an automatic filing extension on your US tax returns that push your deadline to June 15th. If you need even more time, you can request to have your deadline moved to October 15th.

US vs. Georgian Tax Law

Like most nations, Georgia has separate income tax rates for residents and non-residents. This approach to tax law is known as residency-based taxation

In other words, if you reside in Georgia, you’ll have to pay several types of taxes. While you’ll also have to pay taxes as a non-resident living in Georgia, the specific funds you pay taxes on will vary. 

Whereas Georgia follows a residency-based taxation model, the United States uses a citizenship-based model. This means that you’re obligated to pay taxes to the US government as long as you’re a citizen of the United States. Non-citizens are also required to pay certain taxes, but only while in the US. 

As a US citizen living abroad, you’ll have to pay two types of taxes: income tax and Social Security tax. 

What Is the Income Tax Rate in Georgia?

Let’s take a closer look at the income tax rate for foreigners in Georgia vs. the tax rate for expats that have established residency.

Tax Rate for Foreigners in Georgia

Many nations have a scalable income tax system. These systems are designed to tax top earners at a higher rate than those with a more modest income. Scalable income tax rates generally increase in 5% increments. 

Typically, nations that use scalable systems will tax residents based on their gross income. They often tax all foreigners at the highest rate, regardless of income. This is one of the factors that makes Georgia unique.

Instead of using a variable income tax scale, Georgia taxes all income at a flat rate of 20%, regardless of whether you’re a foreigner or resident. Non-residents are taxed only on income they generate in Georgia. 

Tax Rate for Expats that Have Established Residency

If you’re an expat that’s established residency, you’ll also be subject to a flat 20% income tax, just like non-residents. However, your worldwide income will be subject to the 20% income tax as opposed to just the earnings that originate from activities in Georgia.

Additionally, you’ll pay taxes on:

  • Interest rate earnings
  • Rental income
  • Dividends
  • Capital gains

Dividends, interest, and rental income are subject to a 5% tax. Capital gains are subject to the same tax rate as general income. 

Key Takeaways

  • Non-residents pay a 20% income tax on all revenue generated from in-country activities
  • Residents pay a 20% income tax on worldwide income
  • Residents also pay a 5% tax on interest rate revenue, rental income, and dividends 

How to Become a Resident of Georgia

Georgia’s tax law is very straightforward in defining residency.

To be classified as a resident of Georgia for tax purposes, you must be “actually present” in Georgia for at least 183 days in the previous 12-month period. That period can span multiple tax years, but you can only claim residency for the tax year in which the 12 months ended.

For example, let’s say you relocated to Georgia on October 1, 2021, and remained there for at least 183 days over the next 12 months. In this scenario, the 12-month period would end on September 30, 2022. In our example, you could claim Georgia residency status for tax purposes in 2022 but not 2021. 

Pro Tip: When establishing residency for tax purposes, it’s important to keep records of transactions like rent or mortgage payments and flights that document the date you arrive or depart from the nation.

These documents will help you prove that you meet residency requirements and can come in handy if you’re audited by Georgian or US tax officials. 

The IRS tax code is 7,000 pages. Want the cliff notes version for expats? Let us help.

Is There a Georgia-US Tax Treaty?

Tax treaties are agreements between the United States and other nations designed to prevent double taxation. These treaties may also include other protections for expats, such as a reduced income tax rate.

Unfortunately, there is no Georgia-US tax treaty. A lack of a Georgia-US tax treaty is a concern, as it can cause you to overpay in taxes.

For instance, let’s say that your Georgia income is taxed at a 20% rate, and the US taxes your income at 12%. Without the protection of a US tax treaty, you could end up owing a total of 32% in income taxes instead of just 20%. This overlap could significantly impact your net income. 

What About a Georgia-US Totalization Agreement?

There’s no Georgia-US totalization agreement in place, either.

Typically, foreign nations will either have both agreements or neither. However, there are a handful of instances where foreign nations might have implemented a US tax treaty but no totalization agreement. 

Like the tax treaty, a US totalization agreement is intended to guard against double taxation by addressing tax law overlap. While tax treaties focus on income tax overlap, totalization agreements address social program double taxation. 

US citizens are required to pay Social Security tax at a rate of 6.2%. Like general income tax, Social Security tax is calculated using your gross annual income. 

If you’re self-employed, your Social Security tax rate doubles to 12.4%. This is because US employers are required to match their employees’ contributions to the Social Security program. Since self-employed individuals don’t have anyone matching their contribution, their tax liability is doubled.

A lack of a totalization agreement means you’ll be obligated to contribute to both Social Security and any comparable social program in your host nation. Fortunately, Georgia doesn’t have any social program comparable to Social Security.

As such, you won’t have to pay additional taxes to the Georgian government, though you will have to fulfill your obligations to the US Social Security program.

Key Takeaways

  • The standard Social Security tax rate is 6.2%
  • If you’re self-employed, this rate doubles to 12.4%
  • You’ll have to pay a 6.2% tax to the US government on eligible income, even if you’re an expat in Georgia

What Income Can Be Taxed in Georgia?

You’ll be subject to different tax regulations depending on whether you’re classified as a foreigner working in Georgia or a resident.

As a foreigner working in Georgia, you’ll only have to pay a 20% income tax on earnings from in-country activities. Put simply, if you’re employed in Georgia, all these earnings will be taxed at the 20% rate.

On the other hand, if you’re a resident of Georgia, the following income will also be taxed:

  • Worldwide income
  • Interest rate-related earnings
  • Dividends
  • Rental income

When claiming income on your Georgian and US tax returns, it’s essential that both sets of documents accurately reflect your total earnings. Discrepancies can cause you to be audited and may lead to fines as well.

As such, you should make it a point to document all applicable income during the year, especially if you’re generating income from diverse sources, such as wages, pension payments, dividends, and rental revenue.

Tips for Lowering Your Tax Liability

Once you establish residency in Georgia, you’ll be able to take advantage of several programs and credits to lower your tax liability. The most well-known such program is known as Foreign Earned Income Exclusion (FEIE).

Under FEIE, you can designate income earned in foreign nations as “exempt,” which means it won’t raise your tax liability. The FEIE limit is adjusted each year based on inflation. In 2022, the FEIE limit was $112,000.

What does this mean exactly? Simple: if you’ve established residency in Georgia and earned $112,000 or less in foreign wages or other foreign income, your US income tax liability is $0. However, you would likely still be required to pay Social Security taxes at a rate of 6.2%.

File Your Expat Taxes with Greenback Expat Tax Services

Thanks to the information in this guide, you can stop frantically searching phrases like “income tax rate Georgia” and get to work gathering documents and preparing to file your income tax returns.

As you prepare your returns, make sure all forms are filled out completely, and don’t forget to take advantage of credits or programs like those outlined above. Doing so will help you reduce your total tax liability and save money.

Don’t just guess. Get the best advice from one of our expat expert CPAs and EAs.
Whether you need tax advice to prepare for a move abroad, to buy property or even retire, Greenback can help. Consults upfront can help avoid costly mistakes and stress later.
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