“Do I have to pay U.S. taxes even if I work abroad?”
If this sounds familiar, you’re not alone in thinking about how U.S. tax policies can be confusing. But here’s the rule: tax filing for American expats – which includes income, estate, and gift taxes – is governed by the same regulations that are imposed on U.S. citizens working stateside. Therefore, even when you take up residence in
another country, you must still file a U.S. federal tax return.
In other words, as long as you are a U.S. citizen, the requirements for filing taxes remain the same whether you are in the United States or abroad. Your income is subject to U.S. federal income tax, regardless of where you live.
This is because the U.S. government employs citizen-based taxation.
This system requires a citizen or permanent resident of a particular country to pay income tax to that country regardless of where the income was earned. This method is rarely used compared to residency-based taxation, which is adopted by almost all nations of the world.
So, if you are an American expat who works in a country that uses residency-based taxation, chances are, you can face double taxation.
But worry not, because some measures can be employed to address this situation.
The accompanying infographic below contains some tax reduction methods you can use to minimize your taxes as an American expat. It also highlights the core processes required by the Internal Revenue Service in filing your returns as a U.S. citizen living abroad.
Source: https://www.taxsamaritan.com/tax-filing-101-for-us-expats/
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