US Taxes While Teaching Abroad: What You Need to Know
- Do You Have to File US Taxes While Teaching Abroad?
- Navigating Double Taxation for Educators Abroad
- US Tax Credits for Teachers Abroad
- Understanding State Tax Obligations for US Teachers Abroad
- Common Tax Forms for Americans Teaching Abroad
- Still Have Questions about Expat Taxes While Teaching Overseas?
Teaching abroad can be a truly gratifying experience. Teaching internationally gives you an opportunity to explore new cultures and shape minds around the globe. But as a US citizen, you need to stay informed about your US taxes while teaching abroad. Moving overseas doesn’t automatically exempt you from US taxes.
In this article, we’ll guide you through everything you need to know about US taxes while teaching abroad, including IRS regulations for overseas teachers and steps you can take to minimize your tax bill.
Read on to make sure you’re fully prepared for tax season as an American teaching overseas.
- American teachers must file a US tax return even when teaching abroad.
- You may have to file additional tax forms while living and working in another country.
- The IRS provides several tax benefits to help reduce taxation for Americans teaching overseas.
Do You Have to File US Taxes While Teaching Abroad?
All US citizens are required to file a US tax return every year regardless of where they live. This applies to teachers as much as anyone else. And when filing your taxes, you must report your worldwide income—not just US-source income.
For example, let’s say you move to South Korea to teach English. You are paid your salary in South Korean won, file a South Korean tax return, and receive no income from any US sources. Even though you are living abroad and receiving only foreign income, you still have to file a US tax return reporting your South Korean salary.
Dreading the last minute scramble pulling together your tax documents? Despair no more! This simple checklist lists the documents you need to have on hand when preparing to file.
Navigating Double Taxation for Educators Abroad
Because the US taxes citizens on their worldwide income, Americans teaching overseas could be at risk for double taxation. Fortunately, the IRS provides several tax benefits for Americans living abroad. Using these benefits, most expats can erase their US tax bill entirely. This means that you probably won’t end up owing any US taxes while teaching abroad. (Though you still have to file a return, even if you don’t owe any expat taxes.)
US Tax Credits for Teachers Abroad
1. Educator Expenses Deduction
The Educator Expense Deduction lets American teachers deduct up to $300 in qualified expenses from their taxes. Qualified expenses may include:
- Classroom supplies
- Computer equipment
- Professional development courses
However, you can only claim an expense if you paid it yourself without being reimbursed.
If you and your spouse are both teachers, you can increase the maximum deduction to $600 by filing a joint return.
2. Foreign Earned Income Exclusion
Check if you qualify for the Foreign Earned Income Exclusion. This benefit allows expats—including teachers—to exclude some of their foreign income from US taxation. The exclusion amount changes each year. For income earned in 2023, the cap is set at $120,000. As an American teaching abroad, this may cover your entire foreign salary.
3. Foreign Tax Credit
The Foreign Tax Credit lets you offset your US taxes based on any foreign taxes you owe. For example, if you pay the equivalent of $10,000 in taxes to a foreign government, you may be able to subtract the same amount ($10,000) from your US tax bill. In many cases, this credit will reduce your US tax bill to zero.
4. Foreign Housing Exclusion
Using the Foreign Housing Exclusion, you can deduct certain housing-related expenses from your taxes. This may include:
- Utilities excluding cable and phone
- Small repairs
- Homeowner’s Insurance
- Renter’s insurance
The Foreign Housing Exclusion is only available if you qualify for (and claim) the Foreign Earned Income Exclusion.
Understanding State Tax Obligations for US Teachers Abroad
Some Americans teaching overseas are also required to file state taxes. This depends on whether you are still considered a resident of any US state. Some states make it easy to end your residency, while others—known as “sticky states”—make it more difficult. Review your state’s residency policies to learn whether you are likely to be considered a resident after moving abroad.
Common Tax Forms for Americans Teaching Abroad
When teaching abroad, you will probably have to file a tax return in your country of residence. In addition to that, you will have to file at least one US tax form—and possibly more. Here are the most common tax forms for Americans teaching overseas.
1. IRS Form 1040
Form 1040 is the standard US individual income tax return. You will use this form to file your annual taxes whether you live in the US or abroad. For most US citizens, Form 1040 is due on April 15 of each year, but expats get an automatic extension to June 15.
If necessary, you can also request an additional filing extension by June 15 to allow you to file your return no later than October 15 for Form 1040.
2. FinCEN Form 114 (FBAR)
If you have $10,000 deposited in one or more foreign bank accounts, you will have to report it. This is done by filing FinCEN Form 114, also known as a Foreign Bank Account Report (FBAR). The FBAR is technically due on April 15, 2024, but if you miss that deadline, the deadline will automatically be extended to October 17, 2024.
3. IRS Form 8938 (FATCA)
If you own foreign financial assets valued above certain thresholds, you must file a FATCA report using IRS Form 8938. Your filing threshold will depend on your filing status and whether you qualify as a bona fide resident of a foreign country. If you are required to file a FATCA report, simply attach it to your Form 1040 and file both at the same time. Note that you may be required to file this report even if you are not living overseas.
Still Have Questions about Expat Taxes While Teaching Overseas?
Hopefully, this guide has helped you understand what taxes you can expect while teaching abroad. However, expat taxes are nothing if not complicated. If you still have questions, we have the answers.
At Greenback Expat Tax Services, we help Americans around the world file their US taxes accurately and on time. Our services are tailored to every customer’s unique needs. Contact us, and one of our customer champions will be happy to help in any way they can.
If you need specific advice on your specific tax situation, you can also click below to get a consultation with one of our expat tax experts.