The US Expat Tax Filing Considerations for Americans Living in Hong Kong

Hong Kong is one of the most popular places for American expats but how does living in this beautiful city affect their US expat taxes? Hong Kong is an economic hub of China and SouthEast Asia, is respected as one of the most important cities in the world. Additionally, living there as an American, you will think about your home country now and again plus rest assured that it has not forgotten you particularly when it comes to file US taxes.

What you should know?

American citizens and green card holders living in Hong Kong must continue to file a US tax return every year. But filling while living abroad comes with new considerations and questions like do I have additional info to report to the internal revenue system or how do my Hong Kong financial accounts affect my tax filing? How can I reduce my tax return?

In this post, we have outlined some considerations for US citizens working in Hong Kong, thus you know what affects the taxes for US citizens living in Hong Kong they pay as well as which forms taxpayers need to file American Tax for US Residents Living Hong Kong.

U.S expat tax filing considerations

Working as an American in Hong Kong can affect your taxes even if you do not stay for a long time. For instance- if any person earns income while on a short term assignment, that person will need to report that income on his or her US taxes. As you establish deeper financial roots in the city, you will have more considerations for your filling.

You have to report your Hong Kong financial accounts and assets. Usually US taxpayers with over $10000 in foreign bank or financial accounts are subject to FBAR filing and reporting needs. Furthermore, you may be subject to FATCA reporting needs if you have foreign assets valued at $200000 and higher. Taxpayers can reduce their US bill and avoid dual taxation with some tax strategies. You may take advantage of one of two options to lower your taxes. These options are mentioned just below:

    • The foreign earned income exclusion lets you exclude your wages from your US taxes. Keep in mind that this option is available to those individuals who meet certain time based residency needs. The foreign tax credit allows you to claim a credit for income taxes paid to an overseas government. It is usually more favorable for Americans living in Hong Kong to use the foreign earned income exclusion because of lower rates in Hong Kong. Your tax advisor can confirm the best option for you.

    • Your Hong Kong pension is nog tax free in the US. If you participate in a mandatory provident fund or MRP through your employer, you can deduct your contributions from your taxes in Hong Kong. But your contributions are not deductible and your employer's contributions are taxable for the US tax purposes. 

Does US expat taxes rules changed after US election?

 About 9 million US expats live and work in another country but they retain their federal government tax reporting as they retain their US citizenship. With the global pandemic (COVID 19) hit the global economy and after the change in the US government, US citizens living abroad may wonder how the US election will impact expats and taxes. You can expect to have certain change in the expat rules and policies with the win of the democratic party. Irrespective of who wins the US presidency, US taxes will still be a key factor of US expats. US expat tax service providers want to ensure you will always be safe and in good standing with the internal revenue system, thus you don't face unnecessary issues in life. Their tax software makes it simple and easy.

Tax Deadline for Individuals living abroad:

The deadline for filing and pay 2020 federal US tax for US citizens living abroad  is June 15, 2021.

There has been thinking whether expats taxes rules will undergo change or not with the claims that new US government will raise taxes. Joe Biden, the newly appointed president of US, does have some good plans to roll back some changes from earlier president ( Donald Trump) signature tax law, jobs act and tax cuts.

The tax cuts and jobs act signed by former US President Trump on December 22, 2017, was one of the most comprehensive and ambitious tax reform bills in the history of America. It provides many US taxpayers and investors with lower taxes and increased incentives to invest in the US. But, the TCJA was controversial due to its favorable corporate tax provisions and estate tax changes, aa a result culminating with several democrats was focusing their 2018 congressional campaigns on repealing or amended the bills.

Joe Biden government wants to double the GILTI  (global intangible low taxed income) rate from 10.5% to 21% if you want to register an overseas business with a US parent company. GILTI is a concept from the tax cuts and jobs act and this makes corporate taxable income gets added from overseas income. Also, there are lawsuits against this GILTI tax for US expats being examined.

Also, the new government want to raise overall corporate tax (21% to 28%). The political party doesn't want to repeal citizenship based taxation. The newly appointed US president reached out to democrats abroad that he will work with Americans overseas and address expatriate issues.

The majority of Americans expats won't to see any big changes about US taxes. But, the democratic party has won the US election and so there could be some new rules regarding foreign registered businesses. So, American living abroad must look for advising from professional expat tax individuals to make sure that they avoid penalties, adhere to expat tax laws and file US tax in the beneficial way provided their circumstances.

You must do some research online to find the best US tax advice professional, do not forget to ask your friends and business partners for the same.

How to Save Money on US Expat Taxes Return Filing While Living in Australia

 

If you are a US citizen and living in Australia  then filing  Federal tax for non residents is a necessity. It doesn't matter where you are living in the world, but you can save money on your expat taxes. Here are all the details you need so you can save the most money on your US expatriate taxes.

The foreign earned income exclusion

When it comes to reducing American tax for US citizens living Australia,   the most common way US expats reduce their US tax liability. It lets you exclude the first $99,200 of foreign earned income from US taxation. This exclusion is not automatic, but you need to both qualify for and elect it using form 2555 or 2555 EZ as well. You have to pass one of the two residency test to be eligible for the FEIE. 

1) the physical presence test and 

2) the bona fide residence test. Under the first one, you have to physically present inside a overseas country for at least 330 of any 365 day period. But anytime you spend travelling to or from the US can't be included in those 330 days. Track your time very carefully as spending one day too many in the US can cost you big amount.

The foreign housing exclusion

It works in conjunction with the first one ( FEIE) to reduce your income by using your housing expenses you have paid to increase your FEIE for the year while reducing your income. Also, qualify for and claim the FEIE. Have to qualifying foreign housing expenses such as house rent, insurance, furniture rentals and certain utilities. Have paid your housing expenses from employer provided funds that can be designated as housing funds or part of your regular wages. Have housing expenses that exceed the base amount is 16 percent of the FEIE.

The foreign tax credit (FTC)

There are a few of amazing reasons to use the foreign tax credit. The FTC does not need you to have overseas earned income and you don't need to qualify to use it. Thus, if you don't qualify as a US expat and pay taxes on overseas income than you use FTC as a dollar for dollar credit on those taxes you paid to overseas country. Those residing in high tax countries may find that using the FTC can save them more. This is because you may pay more in overseas taxes than you would owe in US taxes that leaves you with additional foreign credits. Also, one can use those additional credits to offset future taxes or could carry back the credits and amend last year's return to potentially get a refund from the internal revenue system.

Those who qualify for the FEIE could use the FTC in conjunction with the FEIE if income exceeds the $99,200 thresholds. In this case you may be able to offset the US taxes on the money of unexcluded income.

These tips will help you save on your expatriate taxes and filing as close to the first deadline as possible. They can also help you save big if you will owe taxes to the IRS.