Do US citizens need to pay taxes when living abroad?

No matter whether you are a U.S. citizen or resident alien, the rules for filing income tax or even gift and estate returns and paying estimated tax are the same whether you are in the U.S or abroad. This means you as an American living abroad or Green Cardholder has to file a US federal tax return if your total income – irrespective of where the income was earned exceeds any of the following minimum thresholds:

• $10,300: For citizens filing as single
• $20,600: For citizens filing as Married Filing Jointly
• $4,000: For citizens filing as Married Filing Separately
• $400: For citizens filing as Self-Employed

So, even if you have not lived in the United States at any point during the year and have earned all of your income in an overseas country, the Internal Revenue Service still expects you to file a tax return. You may be required to file a state tax return as well, depending on where you lived before moving abroad.

Know About Double Taxation

A person who could supposedly be doubly taxed on their income earned both by his or her country of current residence and the US. This is relevant for an American living abroad permanent who may qualify as a resident in other local tax systems. The code related US tax for us citizens living abroad contains a provision (Known as the foreign earned income exclusion (FEIE)) to help avoid this negative consequence. You are permitted to exclude $102,100 of income earned abroad (From your US tax obligation) under the 2017 FEIE.

The Foreign Tax Credit is another provision to help ease double taxation. Americans earning income globally can reduce their US tax obligation beyond the limits of the foreign earned income exclusion if they have paid or accrued tax to an overseas government. But, this provision applies to only certain types of income. Besides, there are some considerations related to each overseas country.

Deadlines and Extensions

Americans living abroad can receive 3 filing extensions in a tax year:

• Automatic filing extension until June 15th. No need to file any form or submit any letter to the IRS as long as you are living in any Foreign Country.
• In case you are not ready to file before June 15th, you can file for an additional extension until Oct 15th. For this, you have to file and send Form 4868 before June 15th.
• The last extension available will push your deadline to file a US expat tax return to Dec 15th. To get it, expats you need to send a letter to the IRS explaining why you need the additional 2months. Keep in mind that you have to do this before October 15th.

Keep in mind that extensions only apply to your obligation to file a tax return. Also, if you owe any tax, then pay them by April 15th. If you, penalties and interests will be applied.