Tax Items of Interest


Life for American citizens and American green card holders living overseas is complicated.  That is certainly a true statement if ever there was one. Not only are there the rules and regulations of the foreign country to attend to, but the US government imposes a variety of requirements that seem to grow ever longer and more complex.  Nowhere is this more evident than with the tax rules.  This brief article is designed to alert you to some of the issues that have crossed my desk recently and seem worthy of mention.  This is not an exhaustive review of any of these matters, but will simply put a spotlight on them so you can take further action if necessary.

(1)  Foreign earned income exclusion—this is not really a matter for much discussion other than to tell you the maximum amount for 2019 is $105,900.

(2)  Tax Cuts and Jobs Act of 2017—This legislation was signed into law by President Trump on Dec. 22, 2017, and goes into effect for tax year 2018.   This means there are a number of changes to allowable deductions, personal exemptions are eliminated and the standard deduction is essentially doubled.  Also, tax rates and brackets have decreased somewhat with the highest marginal rate for individuals decreasing from 39.6% to 37%. However, foreign income still must be reported by Americans living overseas—disappointing many who hoped that residence-based taxation would be considered and approved by Congress.

(3)  FATCA—The Foreign Account Tax Compliance Act requires individual taxpayers to report information about certain foreign financial accounts and offshore assets on Form 8938 and attach it to their income tax return, if the total asset value exceeds the appropriate reporting threshold. This very controversial law has, surprisingly, been adopted by many foreign countries and their banks who are being very conscientious about identifying American account holders and either closing their accounts or dutifully sending account information to the US.  It is therefore a good idea to prepare and attach this form to your tax return if the total amount of assets warrants the form—even though it is largely duplicative of the FBAR form (which also must be filed if account amounts indicate it is necessary).

(4)  Green card holders and filing a US return—Many green card holders are only in the US for a short period of time to work and then go back home, assuming that once they leave the US, their tax filing responsibilities are over—especially if the green card has expired. It turns out this is not the case and as long as they have the green card, they are required to not only file a US tax return, but also report foreign accounts in accordance with FATCA and FBAR rules.  If you are such a person, you will want to look into “abandoning” your green card which is a process that takes place through US immigration officials or a US Consular office. If you have held your green card for a certain amount of time, abandoning the card can lead to tax repercussions as the green card holder may now be considered to have “expatriated”.  Needless to say, if you will want to seek competent counsel to deal with any of the issue described in this paragraph.

(5)  Children of US citizens who live abroad—I kept this title very general as there are all sorts of possibilities regarding parentage and living situations and the rules are pretty complicated. Wikipedia has a pretty good summary in a piece entitled “Birthright Citizenship in the United States”.  If you are a US parent or a child of a US parent, you will want to figure out the citizenship status for a number of reasons, not the least of which is there are significant tax implications. As a parent, you can take claim your US citizen child as a dependent on your tax return, but you will need to get a Social Security number for the child first.  As a child, if you have US citizenship, you will be required to file a US tax return when you start earning income, even if you never lived in the US.  This can cause a host of problems if you never realized you had to file and suddenly find you are years behind.  There are other (complicated) rules that allow you to renounce your US citizenship, but that can be tricky too.  Without making too fine a point of it, it is exceedingly important to research this issue and understand you (or your child’s) citizenship status for tax purposes.


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