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4 Ways US Expat Taxes Have Changed, And How To Prepare

US Expat Taxes have been affected by significant changes to the American tax system between 2017 and 2018.

Some of the changes are made annually, like alterations to tax brackets, deductions, and personal exemptions, though others were distinctive, like the sweeping tax reform that was passed at the end of the year.

This article has been written exclusively for Expat Network by Greenback Expat Tax Services

With tax season well underway, we’ve compiled some of the many ways that expat taxes are different than they were last year.

1) Deductions, Exemptions, and Credits are Different

As usual, deductions and exemptions have been altered, but the extent to which they have been altered is what may come as a surprise to some expats this year. First, the standard deduction is nearly twice what it was before. However, the personal and dependency exemptions have been removed – as has the moving deduction, which may particularly affect expats in the year they are leaving or returning to the US.

Another major change is that the Child Tax Credit has been increased from $1,000 per child to $2,000 per child. Further, the Estate and Gift Tax Exemption has been doubled, and since the figure is linked to inflation, may likely be even higher.


2) Tax Brackets Have Been Changed

Tax brackets are an ever-changing part of US taxes. This year, with decreasing tax rates and the brackets having been expanded, expats may be in a lower tax bracket than they were in years prior.


3) The Measure of Inflation Has Been Adjusted

The way that inflation is calculated has a ripple effect on many other items in the American tax code. For expats, the figures that are tied to inflation include the standard deduction, the Foreign Earned Income Exclusion, and tax brackets.

Before the tax reform was in place, the measure of inflation was the regular consumer price index; however, the measure is now the chained consumer price index. This switch means that a lower rate of inflation will be used for tax calculations, which, at some point in the future, will increase taxes.


4) Deadlines are Slightly Different

As always, tax deadlines shift occasionally year to year due to Tax Day falling on the weekend. This year, instead of April 15th, the deadline to pay any taxes owed without accruing interest is April 17th, as the normal deadline falls on a Sunday, and Monday is Emancipation Day. The automatic extension for expats to June 15th has not changed, and the final deadline for expats who have requested an extension is October 15th. The FBAR is also technically due on April 17th, but again, expats have an automatic extension until June 15th and can request the extension until October 15th as well.


How Can Expats Prepare For the Changes to Their Taxes?

Gathering forms and documents in advance of the deadline is always a great idea. And don’t forget to keep track of your tax returns for at least six years after you’ve filed them, which is the period open to IRS audit.

Remember that the most important provisions for expats still remain in the tax code: the Foreign Earned Income Exclusion, the Foreign Tax Credit, and the Foreign Housing Exclusion. Utilize these credits to reduce or even eliminate your US tax burden. And if you find the system as complicated as many expats do, getting some help from tax professionals who specialize in US expat taxes certainly can’t hurt!


US Expat Taxes