Accountant for Double Taxation Issues for American Dual Citizens

Many American citizens share citizenship with another country. Dual citizenship opens up several doors for both travel and work. Taking a position overseas offers excitement, challenges, and a host of opportunities. However, when you earn foreign income, you could be paying income tax in the country where you are working and in the United States. The U.S. bases federal income tax obligations on citizenship, not where you reside. Therefore, a dual citizen living abroad and earning income could be subject to double taxation.

With the assistance of US Tax Help’s experienced international tax accountants for double taxation issues for American dual citizens, you can understand how foreign income is treated under the United States tax code and how you can avoid double taxation. To learn more about all our tax services for Americans with dual citizenship, you could schedule your first appointment by visiting US Tax Help online or calling (541) 362-9127.

Double Taxation for Americans Living Abroad

If you are an American citizen, you are required to file a federal tax return, even if you are living and working abroad. Americans with dual citizenship must comply with this obligation as well. All your global income, whether derived from your employment, foreign assets, or other income sources, must be declared on your federal tax return. This includes rental income, dividends from investments, and profits earned if you sell your assets. In many cases, the taxes you pay in your country of residence will off-set your US tax liability. However, when a taxpayer is unable to do this, they could be subject to double taxation.

There are options to prevent double taxation if you are a dual citizen of the United States. The Foreign Earned Income Exclusion is available for income from employment, whether you work for a company or are self-employed. Additionally, the Foreign Tax Credit is available to dual citizens. One important note to remember is you are only permitted to claim the foreign tax credit or the foreign earned income exclusion against specific income. You are not allowed to double up on the exclusions for the same income source.

Foreign Earned Income Exclusion for Dual American Citizens

To qualify for the Foreign Earned Income Exclusion, your annual income maximum for the 2020 taxable year is $107,600. Additionally, you must establish that you are living abroad. Dual U.S. citizens can demonstrate that they are residing in a foreign country by passing one of two tests.

To pass the Bona Fide Residence Test, a U.S. dual citizen must prove they have a permanent residence overseas. Typical evidence used to establish a foreign residence includes having a permanent residency visa, proof that you paid foreign income tax, or you own or maintain a home in a foreign country.

There is also the Physical Presence Test. To establish a foreign residency through this method, an American with dual citizenship must prove that they spent at least 330 days outside of the United States during the relevant tax year or the previous 365 day period if they moved back to the U.S. in the middle of a tax period. This test is often used by people who travel extensively and do not maintain a permanent home in a foreign country.

Foreign Tax Credit For US Dual Citizens

No one wants to be subject to double taxation. The Foreign Tax Credit was created to help U.S. citizens minimize the potential of double taxation. In the most basic terms, it grants a taxpayer a tax credit for all or a part of the foreign tax paid in another country.

The tax credit is only for foreign income taxes and profit taxes. This means it does not cover taxes such as sales taxes, foreign property taxes, or foreign value-added taxes. Additionally, you will only receive a foreign tax credit on your federal income tax obligation arising from your foreign income. You are not permitted to use this tax credit to offset any income that arises in the United States, such as rental income, investment dividends, or other income from business within the U.S.

Under the Foreign Tax Credit, U.S. dual citizens are permitted to claim a $1 U.S. tax credit for every foreign dollar equivalent they paid in foreign income tax. If you are paying a higher income tax rate overseas, you should be able to eliminate your federal tax obligation. There is no income tax limit. Taxpayers are also entitled to claim the U.S. Child Tax Credit if you have a child or children.

Our international tax experts can also assist you if you are living abroad and have fallen behind in filing your federal tax returns. At US Tax Help, we could help you avoid potential IRS penalties under an amnesty program known as the Streamlined Procedure. The critical thing to remember is that to take advantage of this program, you must apply for it before the IRS contacts you. Therefore, you should not hesitate in contacting our tax specialists online or by phone.

Call Our Skilled Accountant for Double Taxation Issues for American Dual Citizens for a Consultation

Income tax time is always stressful for the average American citizen. If you are a dual citizen, living and working abroad, it can be more taxing. Our experienced accountants for double taxation issues for American dual citizens can help relieve the stress and frustration of dealing with a complicated tax code. Additionally, we could save you some money. To learn more about services available from the international specialists at US Tax Help can help you file and minimize your US tax obligation, schedule a consultation by visiting us online or calling (541) 362-9127 today.

  • To Get Started, Summarize Your Tax Issue

  • This field is for validation purposes and should be left unchanged.
6 Common Taxpayer Mistakes