What Are the Minimum Tax Filing Thresholds for American Expats?
Determining your tax obligation to the U.S. government when you live abroad can be tricky. Not only are expats expected to file tax returns just like any other citizen, but there are a number of additional forms that they must file to access the various exemptions, exclusions, and deductions for which they may be eligible. Navigating all the paperwork, financial jargon, and tax codes that govern this process might seem difficult in the extreme, but an international tax preparation accountant can decipher the IRS’s arcane rituals to ensure that you are in full compliance with the law. One topic many taxpayers have questions about: What are the minimum income thresholds for filing a return as an expat? Keep reading as the expat tax specialists at U.S. Tax Help provide an answer.
Do I Have to File a U.S. Tax Return If I Live Overseas?
There is frequently some (understandable) confusion about whether a U.S. citizen living in another country must file a tax return with the IRS. The short answer is yes, all American citizens must file a return with the government, regardless of where they live. In fact, the U.S. is one of only two countries in the world with a tax system based on citizenship, rather than location; we share this dubious distinction with Eritrea.
The basic process of filing the return itself is much like what other Americans face: You’ll have to file Form 1040 with the IRS, complete with all relevant information. However, there are other elements to consider as well, such as reporting foreign assets:
- If you have a bank account in a foreign country, you may have to file a Report of Foreign Bank and Financial Accounts, or FBAR, with the Financial Crimes Enforcement Network (FinCEN).
- For large accounts or other types of significant financial assets, the Foreign Account Tax Compliance Act (FATCA) may come into play. This would require you to submit Form 8938, Statement of Specified Foreign Financial Assets, to the IRS.
- Those whose income is earned overseas may be eligible for the foreign earned income exclusion, up to an amount exceeding $100,000. This can save you significant amounts of money each year.
- If you maintain a residence and pay housing costs, they may be used as an exclusion or deduction, depending on what type of earnings go toward housing; anything paid with employer-provided amounts will be an exclusion, whereas earnings from self-employment will be considered a deduction.
A qualified international tax expert can help you determine what forms you need to submit and how to best represent your finances on the necessary paperwork.
Income Thresholds for Filing Taxes as an Expatriate
Though almost all taxpayers will have to submit a tax return to the IRS, there are technically minimum income thresholds below which a person will not have to file. These thresholds differ for those 65 and older or those who are blind, but for others, they are as follows:
- Filing as single: $12,200
- Married and filing jointly: $24,400
- Filing as head of household: $18,350
- Certain widowers: $24,400
For taxpayers who are age 65 or older, simply add $1,300 per spouse if you are married. If filing as single or head of household, add $1,650 instead. If you earn more than the threshold that applies to your filing status, you will need to file a tax return. Even those who are not required to submit one may want to do so anyway, as filing a return is the only way to receive a refund.
The thresholds for the FBAR and FATCA are simpler, however. A person must file an FBAR if they have a financial interest in, or authority over, one or more accounts outside the United States that were worth more than a combined $10,000 at any point over the calendar year. There are some exceptions to this – such as accounts at U.S. military banks – that a specialized accountant can explain in detail.
For FATCA, there are two sets of reporting thresholds: one for taxpayers in the U.S. and another for those living in another country. For those living outside the U.S., Form 8938 must be filed with the IRS if:
- You are filing for yourself only and the total value of all your foreign financial assets is greater than $200,000 at the end of the year or $300,000 at any point during the year; or
- You are a married couple filing jointly and the value of your foreign financial assets is greater than $400,000 at the end of the year or $600,000 at any time during the year.
It should be noted that certain types of assets, such as those maintained at an overseas branch of a U.S. bank, are exempt from FATCA reporting requirements. To help ensure that you are in full compliance with FATCA and all other U.S. tax codes, turn to a qualified CPA.
Skilled International Accountants Available Now at U.S. Tax Help
When navigating the many requirements, forms, and loopholes of the American tax system, the knowledge and skill of the CPAs at U.S. Tax Help can prove invaluable. Led by Ted Kleinman, an international tax accountant with more than 30 years’ experience in international tax planning and preparation, the team of specialists at U.S. Tax Help can be trusted to tackle any problem you may face when filing taxes from overseas. To learn more about how we can help or to schedule a consultation, visit us online or call (541) 362-9127 today.