US Taxes While Teaching Abroad: What You Need to Know
Teaching abroad can be a gratifying experience, but as a US citizen, you need to stay informed about US Taxes While Teaching Abroad. Moving overseas doesn’t automatically exempt you from US taxes, so it’s essential to understand the tax implications of teaching abroad.
In this article, we’ll guide you through everything you need to know about US taxes while teaching abroad, including the IRS rules and regulations that apply to you, the tax benefits available, and the steps you can take to minimize your tax liability. Read on to ensure you’re fully prepared for tax season as a US citizen teaching overseas.
Key Takeaways
- American teachers must file a US tax return even when teaching overseas.
- You may have to file additional tax forms while living and working abroad.
- The IRS provides several tax benefits to help reduce overseas taxation.
Do You Have to File US Taxes While Teaching Abroad?
Yes. 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 and receive no income from any US sources. Even though you are living abroad and receiving only foreign income, you must still file a US tax return reporting your South Korean salary.
The good news is that the IRS provides several tax benefits for Americans living overseas. Using these benefits, most expats can erase their US tax bill entirely. This means you probably won’t end up paying 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:
- Books
- 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
If you qualify for the Foreign Earned Income Exclusion, you can exclude a certain amount of foreign-earned income from your US taxes. The exclusion amount changes each year. For income earned in 2022, you can exclude up to $112,000. For 2023, that cap increases to $120,000.
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 $10,000 from your US tax bill. In many cases, this will reduce your US taxes to zero.
4. Foreign Housing Exclusion
Using the Foreign Housing Exclusion, you can deduct certain housing-related expenses from your taxes. This may include:
- Rent
- Utilities
- 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.
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 18, 2023, but expats get an automatic extension to June 15.
If necessary, you can also request an additional filing extension to October 16 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 17, 2023, but if you miss that deadline, the deadline will automatically extend to October 16.
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.
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 complicated. If you still have questions, we have the answers.
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.
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