Tax Changes for Americans Living Abroad: What’s New for 2017 & 2018

There are a handful of changes in US taxes relevant to Americans living and working in other countries.

No Changes in the Trump Tax Bill for Expats

A new tax bill was signed into law by President Trump in December 2017. Called the Tax Cuts and Jobs Act, this new law changed the US tax rates, increased the standard deduction, eliminated many itemized deductions, and made numerous changes to other tax provisions starting for tax year 2018.

Notably absent from the Tax Cuts and Jobs Act are any changes to the key provisions impacting Americans living abroad. That means Americans living abroad are still taxed on their worldwide income and their foreign accounts still need to be reported on the Foreign Bank Account Report.

Foreign Earned Income Exclusion Increases Slightly

For 2017, Americans who live and work abroad can exclude up to $102,100 as part of the foreign earned income exclusion. The maximum exclusion increases to $104,100 for 2018.

To qualify for the foreign earned income exclusion, a person needs to meet one of two tests. Either the person is a bona fide resident of a foreign country (or countries) for an uninterrupted period that includes a full tax year. Or the person is physically present in a foreign country (or countries) for at least 330 full days in any consecutive 12-month period.

Remember, even if your income is below the exclusion amount, you still must file a tax return, even though you might not owe anything.

Annual Gift Tax Exclusion Increases Slightly

For 2017, the annual gift tax exclusion for all Americans is $14,000 per recipient. For 2018, the annual gift tax exclusion goes up to $15,000.

There’s a separate limitation for gifts between an American citizen and a spouse who is a nonresident alien. For 2017, US citizens can give up to $149,000 to their nonresident alien spouses. That limit increases to $152,000 for 2018.

If gifts made during the year exceed these annual limits, then a separate gift tax return needs to be filed with the IRS.

IRS has New Program to Deny Passports to People Who Owe Back Taxes

Starting in early 2018, the IRS will begin asking the State Department to revoke or deny passports for U.S. citizens who owe the IRS more than $51,000 in back taxes. Taxpayers who do not have a payment resolution set up with the IRS could risk having their passports revoked or having an application for a new passport denied.

The IRS will allow Americans living abroad to travel back to the U.S. before their passport is revoked.

Key Tax Deadlines

April 17, 2018 — deadline for paying any US federal income tax for the year 2017. For those living inside the U.S., this is also the deadline to file a personal tax return or to request an extension.

June 15, 2018 — deadline to file a personal tax return if you live outside the U.S. You also have the option to request an extension until October.

October 15, 2018 — final deadline to file a personal tax return for the year 2017. Also, the last day to file the Foreign Bank Account Report for year 2017.

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