Expat Tax Q&A: Do I Really Have to File?

Ed note: H&R Block Expat Tax Services is a highly specialized team of tax attorneys, CPAs and enrolled agents whose singular focus is expat tax preparation for Americans abroad. These tax situations can be very complex, so we are featuring some answers to common questions here. Today’s post focuses on general reporting requirements. Remember that due to the complexity of U.S. tax reporting for expats and its highly fact-specific nature, these responses provide general information. Leer en Español.

Do you have to make a certain amount living abroad before you pay taxes back to the U.S.?

U.S. citizens and residents are taxed on their worldwide income. So regardless of where you work, you must report your income as if you worked within the United States. However, certain rules and benefits are available to expats, such as the foreign earned income exclusion (FEIE) and foreign tax credit (FTC).

The FEIE allows U.S. citizens and residents working abroad to exclude up to $99,200 from their 2014 taxes. But you still need to file a tax return to claim this benefit. Expats can only exclude earned income, which includes salary, and wages. So, retired expats living off of Social Security and pension income most likely will not qualify for the exclusion. There are some tests you must meet before you can claim the exclusion.

The FTC allows you to offset your U.S. tax liability with taxes paid in your country of residence. Often you will owe no tax, but the rules are complex depending on the country where you live and which foreign taxes can be claimed for the foreign tax credit.

The filing threshold requirements are the same for expats as they are for other U.S. taxpayers.

This Q&A first appeared in an American in Britain magazine article.