Foreign Earned Income Exclusion (FEIE)

Allows qualifying expats to exclude a set amount of foreign earned income from US tax You must meet the bona fide residence test or physical presence test (330 days abroad) The exclusion applies only to earned income, not investment income or pensions Electing the FEIE requires Form 2555 and is difficult to re-elect if revoked for five years

Foreign Housing Exclusion and Tax Treaties

The housing exclusion covers qualifying housing expenses above a base amount abroad Eligible expenses include rent, utilities, and insurance but not mortgage payments Tax treaties between the US and other countries can reduce or eliminate double taxation Totalization agreements prevent dual Social Security taxation in treaty-partner countries

FBAR and FATCA Reporting

FBAR (FinCEN 114) is required if foreign account balances exceed $10,000 at any point FATCA (Form 8938) requires reporting foreign financial assets above higher thresholds The two filings overlap significantly but go to different agencies Penalties for non-filing are severe, up to $10,000 per violation for FBAR

State Tax and Retirement Account Issues

Some states continue to tax former residents who maintain ties like a home or license Establishing domicile in a no-income-tax state before moving abroad can sever state ties US retirement accounts remain accessible abroad but some custodians restrict non-US addresses Foreign mutual funds are taxed punitively as PFICs; use US-domiciled funds instead

Exit Tax and Expatriation

Renouncing citizenship or surrendering a green card can trigger an exit tax Covered expatriates are treated as selling all assets at fair value before expatriation You are covered if net worth exceeds $2 million or average tax liability exceeds a threshold Deferred compensation and certain trust distributions face 30% withholding after exit

Common Mistakes Expats Make

Failing to file US returns because they assume living abroad eliminates the obligation Investing in foreign mutual funds without understanding the punitive PFIC tax regime Not comparing FEIE vs foreign tax credits, which sometimes produce a better result Overlooking state filing requirements, especially in high-tax states with broad sourcing

Expatriate Tax Planning

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US Worldwide Taxation Basics

US citizens and green card holders owe federal income tax on worldwide income
This obligation continues even if you live and work abroad for decades
Filing thresholds are the same as for domestic taxpayers; most expats must file annually
The US is one of only two countries that tax citizens regardless of residency

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US Worldwide Taxation Basics

Foreign Earned Income Exclusion (FEIE)

Foreign Housing Exclusion and Tax Treaties

FBAR and FATCA Reporting

State Tax and Retirement Account Issues

Exit Tax and Expatriation

Common Mistakes Expats Make

Related Topics

Expat Tax Optimization Strategies

FBAR & FATCA: Reporting Requirements for Foreign Accounts

529 Plan Tax Strategies

US Worldwide Taxation Basics

Foreign Earned Income Exclusion (FEIE)

Foreign Housing Exclusion and Tax Treaties

FBAR and FATCA Reporting

State Tax and Retirement Account Issues

Exit Tax and Expatriation

Common Mistakes Expats Make

Related Topics

Expat Tax Optimization Strategies

FBAR & FATCA: Reporting Requirements for Foreign Accounts

529 Plan Tax Strategies