In short – yes. If you’re a US citizen or resident alien, your worldwide income will be subject to income tax, regardless of where you reside. The rules for filing income, estate and gift tax returns are in general the same whether you are in the United States or abroad.
Citizenship based taxation
If you’re an American living abroad there is no escaping filing your federal tax return – even if you take up residence in a new country. Instead, the US adopts a citizen based taxation system that looks at your income wherever you are based.
Worldwide there are over 200 sovereign territories employing 4 taxation systems:
No taxation – Income is not taxed at all e.g. Monaco or Qatar
Territorial-based taxation – Individuals only pay tax on income made inside their borders e.g. Singapore and Lebanon
Residence-based taxation – Local residents pay tax on all income earned from local and foreign sources e.g. Germany and France.
Citizenship-based taxation – Tax is based on citizenship status regardless of income source e.g. USA.
When and where to file
For US citizens living abroad, on the regular due date of your return (April 17th), you will be given an automatic extension to file your return by June 15th. You must pay any tax due by April 15th or interest will be charged from April 15th.
If you live abroad in a foreign country, you tax returns can be mailed to:
Department of the Treasury
Internal Revenue Service Center
Austin, TX 73301-0215
USA
Taxpayers with an Adjusted Gross Income (AGI) within a specific threshold can file electronically for free using Free File. Those with an AGI above the specified threshold can either use Free File Fillable Forms or e-File by purchasing approved software.
Completing your Federal Tax Return
The US citizenship taxation system means that foreign income is taxed at the same rate as income earned inside the US. This means that you will need to file a US federal tax return; regardless of where the income was earned, if it exceeds the following thresholds:
|
Status |
Threshold |
|
Single |
$10,300 |
|
Married filing jointly |
$20,600 |
|
Married filing separately |
$4,000 |
|
Self-employed |
$400 |
When if comes to filing your return, the IRS also requires that you disclose your foreign accounts and assets in addition to earned income. Values over a certain threshold, including contributions to foreign retirement accounts, may be taxable.
If you are unsure in any way about your obligations, speak to a member of our dedicated team. Experts in expat tax, we have helped many Americans abroad navigate the complexities of US taxes and federal tax returns.
