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.