Do you have to pay double taxes? In many cases, you do not have to pay American tax as an American living abroad. Everything paid to the country where you reside can often be stripped of the tax payable in America. But this is not always possible: then there is double taxation.

Global income (from employment or assets) should be declared through the annual US tax return. In the US, income from work or income as a self-employed entrepreneur or pension income should be declared.

In addition, you should also declare income from property, i.e. the actual interest received, and dividends received on shares. If assets are sold, the profits earned (i.e. this is the difference between the purchase price and the sales price) in principle fall under the US tax levy. On the other hand, losses in sales may also be settled.

The US wants to initially raise tax on this taxable income, but it doesn’t mean that one will actually be paying taxes to the IRS.

Avoid double taxation

In the US, there are several facilities to prevent double taxation. One can claim the so-called “Foreign Earned Income Exclusion” for income from employment (paid employment or income from self-employment). This is a deduction of up to $120,000 (for 2023). For other income, one must fall back on another facility, the so-called “Foreign Tax Credit” which means the paid income tax, excluding national insurance premiums, can be settled with U.S. tax.

Based on the credit method in the US, one will only have to pay tax in the US if the tax rate abroad is lower than the U.S. rate, or if the income is exempt in the country where you reside. This can include things that may be taxed in the US and not abroad, or taxed lower, such as rental of real estate, certain benefits, investment products, or sales of real estate.

Questions about double taxation

If you have any questions about double taxation and the US tax obligation you can contact Americans Overseas. Two dual nationals living abroad founded Americans Overseas. In the costly and exhausting process of finding the right experts, they realized they had not only accumulated a mountain of knowledge but also built up a solid network of tax and legal experts. This could be of great benefit to others in similar situations.

Americans Overseas informs and connects US persons to a select network of specialized US tax consultants to help them with the IRS tax return, avoid double taxation, and become compliant.


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