It’s always an exciting opportunity when one can go abroad to teach. You will have to say goodbye to beloved persons and things. But although you are leaving the continental US, your tax obligations stay with you. We’ve written the following guide to help educators abroad understand if, when, and how they need to file their US tax returns.
Table of Contents
- The Basics About Taxes for Expats
- When are Tax Returns Due?
- How Can You Reduce Your Potential Tax Due?
- Documents You Need to File Your Expat Tax Return
- When You are Married to a Non-US Person and Have Children
- Ines Zemelman
The Basics About Taxes for Expats
You must still file a US tax return even if you do not live in the states
If you are a US citizen or Green Card holder and assuming you meet the minimum filing thresholds, you must file an annual tax return reporting your worldwide income.
We have attached a table of minimum (income) filing requirements for the 2017 tax year.
Filing status: Single
- Under age 65: $10,350
- 65 or older: $11,900
Filing status: Married Filing Separately
- Any age: $4,050
Filing status: Head of Household
- Under age 65: $13,350
- 65 or older: $14,900
Filing status: Married Filing Jointly
- Under age 65 (both spouses): $20,700
- 65 or older (one spouse): $21,950
- 65 or older (both spouses): $23,200
Filing status: Qualifying widow(er) with dependent children
- Under age 65: $16,650
- 65 or older: $17,900
Filing status: Self-Employment
- Any age: $400
Although you have to file, you likely do not have to pay
The good news is that most American teachers abroad don’t end up paying any taxes to the IRS. There are many tax deductions available which allow taxpayers to deduct more than $100,000 from their taxable income. But – they must continue to file. Failure to do so can lead to penalties.
Financial reporting requirements
Aside from filing returns, you may also be subject to FBAR and FATCA (Form 8938) filing requirements. These forms do not generate tax due, but are simply informational – do not ignore these! Failure to file these informational forms may generate large penalties.
FBAR is filed with the treasury and is required if the sum of your non-US accounts exceeds $10k USD at any point in the year. FATCA (form 8938) has higher thresholds (depends on where you live and what your marital status is. See our full guide link above.), and is filed as part of your tax return to the IRS.Error, group does not exist! Check your syntax! (ID: 10)
When are Tax Returns Due?
June 15 is the filing due date. For those working abroad, the first and most straightforward difference is the date when your tax return is due. If you reside abroad on tax day, April 15, you are eligible for an automatic extension to file until June 15. If you would like, you can also apply for an additional extension to file until October. Now – although you can file later with the extension, if you do wind up owing tax, interest will begin to accrue from April 15.
Note: starting in 2017, the date for FBAR is April 15 as well, but with an automatic extension through Oct 15.
How Can You Reduce Your Potential Tax Due?
Exclude $100k of taxable income
The Foreign Earned Income Exclusion (FEIE) is the amount you can deduct from your foreign taxable income, during the course of filing your tax return, to reduce the tax you may owe. Ie – if you make 75k USD, you likely don’t owe tax, but you still have to file. Until you file and properly utilize the FEIE – it is not granted to you.
No double taxation
Tax paid to another country can be utilized via the Foreign Tax Credit.
Do you rent your apartment?
You can deduct that, too. The Foreign Housing Exclusion allows you to further reduce your taxable income if you reside abroad.
Documents You Need to File Your Expat Tax Return
Unlike a U.S. employer which will issue a W-2, which will be sent to the IRS and to you, your foreign employer will not provide you with such a form (and even if there is a local tax declaration, it does not get forwarded to the IRS). As such, you should keep accurate records of your finances. Similarly, you do not need to send the Treasury your bank receipts for your FBAR, but you should maintain records.
If you do not have reliable mail in your location, you should be wary of using a US address on your return, as that may trigger unwanted letters from state tax authorities trying to claw back income that you have earned outside of their jurisdiction. You can look into a virtual mailbox for these matters. Please see Expats And State Taxes as well as Virtual Mailbox And Why You Should Have One.
When You are Married to a Non-US Person and Have Children
You do not have to include your non-US spouse on your US tax return if you do not want to. There are instances when it may be beneficial to do so, but in general, you simply need to claim you are married (you cannot file single if you are married – only married filing jointly, married filing separately, or head of household.
If you have children who have a social security number, you may also be eligible for a refundable child credit, over $1,000 per child.
That’s certainly a mouthful, but hopefully, this information will help stay on the good side of Uncle Sam. We hope that this guide will help you make educated financial decisions before embarking on the wonderful journey of teaching overseas!
Ines Zemelman is the founder of Taxes For Expats (TFX), a tax preparation firm dedicated to Americans overseas. With over 25 years experience and clients in 190 countries, Ines and her team can assist with any tax issues that arise.