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Expats and US Tax

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How Do Expats Pay Tax While Living Overseas?

Do you have questions about expats and US tax? You’re not alone. Many people are confused about how to pay taxes when they live overseas. How does it all work? In this blog post, we will discuss the basics of expat taxation and answer some common questions. We will also provide tips for filing your taxes as an expat.

To start, do you owe tax in the United States while living overseas? The answer is maybe. The United States taxes its citizens on their worldwide income, no matter where they reside. However, there are some exclusions and deductions that you may be eligible for as an expat. These can help to reduce or even eliminate your US tax liability.

For example, the Foreign Earned Income Exclusion (FEIE) allows you to exclude a certain amount of your income from US taxes. To qualify, you must meet the physical presence test or the bona fide residence test. The physical presence test requires that you be outside of the United States for at least 330 days during a 12-month period. The bona fide residence test is a bit more complicated and requires that you establish residency in a foreign country.

If you are required to pay US tax, as many expats are, you will need to file a US tax return. This can be a complicated process, as you will need to report all your income, regardless of where it was earned. You will also need to report any foreign bank accounts or investments that you have.

Fortunately, there are a few programs and credits that can help reduce your US tax liability. The Foreign Earned Income Exclusion allows you to exclude up to $101,300 of your foreign earned income from your US taxes. There is also the Foreign Tax Credit, which allows you to credit any foreign taxes that you have paid against your US tax liability.

If you need help, don’t be afraid to contact a tax specialist; it’s better to pay a small fee for expert help than make a mistake that leads to heavy fines and penalties. 

Expats Can Save Tax 

We’ve mentioned various credits and programs, but there’s another way to save tax when living abroad…mail forwarding. Essentially, the idea is to register an address in a state that has more favorable tax laws. Companies like Dakota Post allow customers to have all mail sent to a South Dakota address because there is no state income tax, and the state has favorable laws for small businesses. 

Of course, you’ll still have to pay federal tax on your income but using a service like Dakota Post could help you save a significant amount of money. The company will receive your mail, and you can log into an online portal to decide what you want to do with it. Depending on its importance, you can request that it be destroyed or sent to your foreign address. 

South Dakota is a popular state for this type of service because it has no state income tax. This means that any money you earn while living overseas won’t be subject to state taxes. Additionally, the state has some of the most lenient tax laws in the country; this includes lower vehicle tax and even insurance. 

If you want to reduce your tax burden as an expat this year, consider using a South Dakota mail forwarding service. This will help you minimize your US tax exposure and keep more of your money in your pocket! 

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