Living abroad as an expat can be an exciting adventure, but it also comes with certain responsibilities, such as filing taxes. As an American expat living in Australia, you may wonder whether or not you need to file taxes in the United States. In this article, we’ll explore the answer to that question and what you need to know.
The short answer is yes, as an American expat living in Australia, you are required to file taxes in the United States. The United States is one of the few countries in the world that taxes its citizens on their worldwide income, regardless of where they live. However, there are certain exemptions and credits available to help reduce your tax liability.
One of the most important things to know is that the United States and Australia have a tax treaty in place that helps to avoid double taxation. This means that if you pay taxes in Australia on your income, you may be able to claim a foreign tax credit on your U.S. tax return. The foreign tax credit can reduce your U.S. tax liability dollar for the amount of tax paid in Australia.
Another important thing to consider is the Foreign Earned Income Exclusion (FEIE). This exclusion allows you to exclude up to a certain amount of foreign-earned income from your U.S. taxable income. For the tax year 2020, the maximum amount you can exclude is $107,600. To qualify for the FEIE, you must meet certain requirements, such as living abroad for at least 330 days in 12 months or being a bona fide resident of a foreign country.
It’s important to note that even if you don’t owe any U.S. taxes because of the foreign tax credit or the FEIE, you still need to file a tax return. Failure to do so can result in penalties and interest charges, even if you don’t owe any taxes.
If you’re unsure about how to file your U.S. taxes as an expat in Australia, it’s recommended that you seek the advice of a qualified tax professional who specializes in expat taxes. They can help you navigate the complexities of the U.S. tax code and ensure that you comply with both U.S. and Australian tax laws.
As an American expat living in Australia, it’s important to understand your tax obligations and take the necessary steps to ensure that you comply with U.S. tax laws. By taking advantage of the foreign tax credit and the FEIE, you can help to reduce your U.S. tax liability and avoid double taxation. Consulting with a qualified tax professional can also help you to navigate the complexities of expat taxes and ensure that you’re meeting all of your obligations.