Frequently Asked Questions
US Expat Tax Planning

Are you an American who needs help with expat tax advice and planning? Get information on whether you need to file local or state taxes and more!

Am I entitled to Social Security as an US expat?

As a US expat, you are still entitled to the same US Social Security benefits as any other citizen of the United States. Agreements are in place with 24 countries that also have social insurance programs similar to US Social Security; these agreements are intended to eliminate dual taxation when it comes to social security. They also determine to which country social security is paid based on residency, the duration of stay in that country, and for whom you work while living in your host country. For countries where there is no agreement in place, you may fall subject to dual taxation.

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Are capital gains included in worldwide income?

Capital gains are included in your worldwide income for US tax purposes. Gift, real estate, and inheritance taxes all apply to US citizens and Green Card holders regardless of where they were located. You will also be taxed on any income from dividends or investments overseas and may face increased reporting requirements on foreign mutual funds or investment vehicles. There may also be different tax rules and exceptions for each type of investment, so we suggest you seek expat tax advice regarding any capital gains you expect to receive in a given tax year.

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Can I use an IRA to save for retirement while working as a contractor overseas?

You are not allowed to contribute income that has been excluded under the Foreign Earned Income Exclusion to an IRA. So, if you have excluded all of your income under the FEIE then you may not contribute to an IRA. If you already have, then you will have made an excess contribution that will need to be withdrawn. If you have income that was not excluded under the FEIE then you can contribute to an IRA, subject to the income restrictions for the specific type of IRA.

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Can my non-US spouse receive my Social Security benefits?

In most cases, the answer is yes. Foreign spouses generally qualify for Social Security survivor benefits, which are the deceased US worker’s full benefits. In the case of dependent or spousal Social Security, a foreign spouse will likely qualify, receiving half of the US expat’s benefit.

There are lots of rules and exceptions to this, and of course we can’t outline every one of them here, as they vary by country. Below are a few of the basic requirements:

  • You must have worked and contributed to Social Security for at least 10 years.
  • You must be at least 62 years old.
  • You cannot be a resident of Cuba or North Korea, although if you are, you can receive all back payments owed once you move to a country where you are eligible to receive benefits.
  • You must not be in a country where payments are prohibited: Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan. Please note: this list may change.
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How do I approach US expat tax planning?

Expat taxes are a bit different than standard US taxes for a number of reasons, including local country tax planning and the exclusions and deductions that are available to US expats to help avoid double taxation. Unfortunately, many of the tax planning vehicles sold or recommended in other countries are not suitable for US expats. In fact, the IRS may view some of these very negatively!

A consultation with an expat tax expert can be extremely helpful for those who want to work through specific details regarding how they will be taxed while living abroad, how to save for retirement, or any other aspect that goes into taxation and your overall financial plans. We offer consultation services which allow you to plan for your taxes according to your specific needs.

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How do I give up my US citizenship?

Renouncing US citizenship has become more and more popular with expatriates in order to reduce their tax and reporting burdens to the US government. Doing so requires the filing of delinquent tax returns and a final tax return. You must also complete Form 8854 and file it with your final tax return.

Please note: once your citizenship has been revoked, you must turn in your passport and will be treated as a non-resident any time you come to the United States for a visit. Further, you will never be able to receive US citizenship again after you have renounced your citizenship or Green Card. This decision should not be taken lightly.

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How does buying or selling real estate change my US expat taxes?

Buying or selling real estate abroad has a drastic effect on your US expat taxes. Any gains on the sale of real estate are subject to taxation. However, if you have lived in the home as your principal residence, you are able to exclude up to $250,000, or $500,000 for those who are married and filing jointly. Please note: even if the real estate income was abroad, it is not considered foreign earned income and therefore not excluded by the Foreign Earned Income Exclusion. You must also take into consideration the currency fluctuations, as this does have an effect on how much capital was really earned by your purchasing and selling of real estate overseas. Gains from real estate can put you into a different tax bracket and drastically increase your US expat tax obligation. It is wise to talk to a tax planner before investing in real estate abroad.

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How long should I keep IRS records?

In general, tax returns and all the supporting documentation must be kept at least seven years. The IRS can audit your return for up to six years from your filing date. However, the six-year limit only applies to good-faith errors.

The IRS has more information here.

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How should an American expat plan for retirement?

Like Social Security in the US, many countries have mandatory retirement savings programs that you must pay into as an employee. This is an area where you will need to plan ahead. Investing in the currency in which you plan to retire is advisable. If you plan on retiring in the United States, you may wish to keep paying into Social Security and open US-based retirement accounts. If you plan on retiring abroad, you may want to open a retirement savings account in that country, but be aware of filing requirements for financial accounts abroad – including the FBAR and FATCA/Form 8938. US taxes can have a seriously detrimental impact on your retirement savings, especially if investing overseas, as some local country savings plans are not treated as retirement plans by the IRS. We recommend that you speak to an expat tax adviser regarding your specific retirement planning options and how your US expat taxes will be impacted.

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If a superannuation account is not considered a retirement account by the IRS, then a withdrawal from it should therefore not be considered a distribution, right?

In a sense, it is not considered a distribution. But the important thing to consider is that it’s an account that has earned income. Contributions to this plan that were made post-tax have created a basis in the account; thus, your withdrawals (distribution) are not taxable. What is taxable, however, is the income that has been earned within the account, whether it be an increase from a change in market value or currency fluctuation, interest, dividend or capital gain. The problem is that these varieties of income have become almost impossible to trace, and the most conservative approach would be to include any withdrawal made beyond what you have contributed (i.e. your basis) in your ordinary income.

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