U.S. Expats Living in Croatia: How to File Taxes
U.S. expats living in Croatia must know how to file their taxes. The rules change once you move abroad and can become complicated quickly. So how do you file your taxes as a U.S. expat living in Croatia, and what do you need to know?
Filing your taxes as a U.S. expat filing in Croatia can involve more steps than when you lived in America. In addition to being liable for U.S. taxes, you may also have to pay taxes in your new country of residence. When filing your taxes, you may need to complete IRS Form 8938, depending on the aggregate value of your foreign financial assets. Luckily, U.S. expats living in Croatia are eligible for multiple tax benefits, including the Foreign Tax Credit and the Foreign Earned Income Exclusion benefit.
US Tax Help is here for you during tax season. Our certified public accountants can make filing your taxes as a U.S. expat living in Croatia much simpler. For more information, visit our website or call the CPAs for American expatriates at US Tax Help today at (541) 362-9127.
Do You Have to File U.S. Taxes as an Expat in Living in Croatia?
Moving abroad can be exciting, especially to a beautiful country like Croatia. But, once tax season rolls around, you may be surprised to find out that you still need to pay taxes in America. If you no longer live in the United States, why is that the case?
The U.S. operates within a citizenship-based taxation system. So, as long as you retain your American citizenship, you will have to pay taxes in the U.S. if you’re an expat living in Croatia.
This can be confusing to some U.S. expats. Filing your taxes is probably not the first thing on your mind when you relocate overseas. However, failure to file your U.S. taxes while living in Croatia can result in serious fines from the IRS. It’s important to stay up to date on filing your taxes as an expat living in Croatia.
Do You Have to File Taxes in Croatia as a U.S. Expat?
Filing your taxes can quickly become complicated as a U.S. expat living in Croatia. Not only are you responsible for filing your annual tax return with the IRS, but you may also have to pay taxes in your new country of residence.
Although the United States has a citizenship-taxation system, Croatia does not. Croatia operates within a residency-based taxation system. That means that if you are a resident of Croatia, you will also have to pay taxes there. Because of this, it’s helpful to work with an accountant, like the CPAs for American expatriates at US Tax Help, to handle your American taxes.
The thought of paying taxes in two countries can seem overwhelming. However, U.S. expats can benefit from the Foreign Tax Credit Benefit while living abroad in Croatia to reduce their American taxes.
Forms U.S. Expats Living in Croatia Need to File Their Taxes
When you file your U.S. taxes while living in Croatia, the process looks a bit different. You will require additional forms that you may not have needed when you lived in the United States. The main form to concern yourself with is IRS Form 8938.
IRS Form 8938 is required for U.S. expats living in Croatia if their foreign financial assets exceed a certain amount. Completing this form is for informational purposes only, not necessarily for tax purposes. However, it must be included in your annual tax return.
Foreign financial assets include bank accounts, stocks, or bonds, issued or held outside of the United States. When you live in Croatia as a U.S. expat, you may decide to concentrate most of your finances there. You may hold your income in a Croatian bank account for simplicity and ease. Because of this, you may have to report your assets to the IRS on Form 8938. You will have to do so if:
- You are filing independently, and your aggregate foreign financial assets exceed $200,000 on the last day of the tax year or $300,000 at any point during the tax year, or;
- You are filing jointly, and your aggregate foreign financial assets exceed $400,000 on the last day of the tax year or $600,000 at any point during the tax year
If your foreign financial assets do not exceed those amounts, you will not have to report them using IRS Form 8938. The difficulty is, U.S. expats may not know what foreign financial assets are or that they have to report them at all. That is why enlisting the help of an experienced accountant, like the CPAs for American expatriates at US Tax Help, is beneficial. If in your first few years of living in Croatia, you did not have to file Form 8938, but now you do, you may not know and face penalties from the IRS.
Are There Tax Benefits for U.S. Expats Living in Croatia?
Luckily, there are tax benefits for U.S. expats living in Croatia. The most significant is the Foreign Tax Credit benefit. This allows you to reduce your taxes owed to the United States because you also pay taxes in Croatia. The Foreign Earned Income Exclusion benefit is also helpful to U.S. expats living in Croatia.
The Foreign Tax Credit benefit lets U.S. expats match their taxes paid in Croatia when filing their annual tax return. For every United States dollar paid in taxes to Croatia, you can reduce your taxes to the IRS. Not all taxes paid to Croatia qualify, although common ones, like income taxes, do.
The Foreign Earned Income Exclusion benefit also applies to U.S. expats living in Croatia. This benefit allows you to exclude a portion of your Croatian income from your taxable income. In 2022, the exclusion cap is $122,000. That means you can exclude a significant portion of your income when filing your American taxes.
Croatian residents that are also American expats must still file their annual tax return, even if both benefits exclude them from paying taxes in the United States.
Our CPAs Can Help U.S. Expats Living in Croatia File Their Taxes
When you move abroad to Croatia, you should enjoy it without worrying about paying your American taxes. To learn more about how the CPAs for American expatriates at US Tax Help can make tax season easier for you, visit our website or call today at (541) 362-9127.