Taxes for US Expats Living in New Zealand

Moving overseas is an exciting adventure, and no one wants to get bogged down by the idea of taxes when they embark on such a voyage. However, you could face serious issues if you ignore your tax liability.

While living in New Zealand, you will still have a tax obligation to the United States. You might even need to give the IRS more information than you did in the past. For example, you might need to file Forms 8938, 3520, and 114, depending on the size of your foreign financial assets and whether or not you have received foreign gifts. Though you might need to file more forms, you might also benefit from more exclusions and credits than when you lived domestically. For example, expats can exclude large amounts of foreign income from taxation and use foreign taxes to offset their American tax liability. Proper tax preparation and planning will be key to lowering what you owe while staying compliant.

To get help from our tax CPAs for American expatriates living in New Zealand, call US Tax Help now at (541) 362-9127.

Your Tax Obligation While Living in New Zealand

When you move to another country, your tax obligation might look different, but it will not disappear altogether. This applies to all American citizens, including those who choose to expatriate to New Zealand,

Your tax responsibility to the IRS will not go away if you move to New Zealand. You will still have to submit a tax return each year. Using this return, you must report your worldwide income, including income earned from foreign and American sources.

Although you will still be obligated to file a tax return, the actual amount you pay in taxes might go down after our tax CPAs for American expatriates claim certain exclusions and credits on your behalf.

Whether you continue to have a tax liability to your old home state will depend on several factors, like the state’s tax rules and if you own property there or have significant ties to the state. You should confirm whether or not you need to submit a state return, which might be the case, especially if you only recently moved abroad to New Zealand from the United States.

Filing IRS International Information Returns from New Zealand

After you move to New Zealand, you may have to submit certain international information returns in addition to reporting your income to the IRS.

IRS Form 8938

For example, certain expats must file Form 8938. Reporting is necessary for expats with a certain amount in specified foreign financial assets. Form 8938 is mandatory for anyone with $200,000 in foreign financial assets at the end of the year or more than $300,000 at any point during the tax year.

IRS Form 3520

If you receive any gifts from foreign persons or trusts when residing in New Zealand, you must report those gifts using IRS Form 3520. Furthermore, you must file Form 3520-A to report the trust’s activities if you inherit a foreign estate.

FinCEN Form 114

The Financial Crimes Enforcement Network (FinCEN) keeps tabs on American money overseas. If you ever have upwards of $10,000 in your foreign bank accounts, you will have to file FinCEN Form 114 for that tax year. This is also known as a Report of Foreign Bank and Financial Accounts or an FBAR. An FBAR is only for informational purposes. That said, if you do not file an FBAR for a required year, FinCEN could fine you $10,000 for a non-willful violation. Fines for willful FBAR violations can be $100,000 or 50% of the balance of your foreign bank accounts, whichever amount is greater.

IRS Tax Perks You Should Learn About When You Move to New Zealand

The two main tax perks for expats are the foreign earned income exclusion (FEIE) and the foreign tax credit (FTC). To get these benefits, you will have to submit the right forms to the IRS alongside your annual tax return.

Foreign Earned Income Exclusion

Expats can use IRS Form 2555, Foreign Earned Income to exclude much of their income from taxation by the United States. For the 2024 tax year, the maximum FEIE is $126,500 per taxpayer. When working out the FEIE, our tax accountants can consider if you can also use the foreign housing deduction. This can let you exclude funds you used to pay for your housing costs in a foreign country like New Zealand.

Foreign Tax Credit

The foreign tax credit also helps expats avoid being taxed twice on the same income. By filing Form 1116, you can use taxes paid to New Zealand to offset your tax liability to the United States.

Two-Month Filing Extension

In addition to offering exclusions and credits to expats, the IRS also offers an automatic two-month filing extension for any taxpayer living outside the United States. So, instead of having to file by Tax Day to avoid penalties, you would have until mid-June to file. That said, if you owe any tax on Tax Day, interest will begin accruing, even with the two-month filing extension.

How to Prepare for Tax Season While Living in New Zealand

Before you move abroad, our tax accountants can explain how tax season might differ for you as an expat so that you know what to expect. By planning your move intentionally, you can ensure that you qualify for expat-specific tax perks and will meet either the bona fide residence test or physical presence test for that tax year.

We can help you optimize exclusions through careful planning. For example, if you file your taxes jointly with your spouse, you could exclude up to $253,000 of your foreign income, twice the exclusion for individual filers.

Although the IRS will grant you a two-month filing extension, plan on submitting your annual tax return and all other supplemental forms by Tax Day to avoid any issues.

Contact US Tax Help for Assistance with Your Taxes Now

Call our tax CPAs for American expatriates at (541) 362-9127 to learn more about what US Tax Help can do for you.

6 Common Taxpayer Mistakes