Most US taxpayers (citizens and resident aliens or greencard holders) living and working in Hong Kong or overseas are required to file US taxes if they meet certain minimum income levels. For tax year 2017, if you file as single, then you must file a tax return if your gross income is $10,400 USD or more (no matter where you live). The US is one of the few countries around the world that taxes individuals on their worldwide income. Even with the US filing requirements, you (living overseas) are allowed some benefits that taxpayers living in the US are not allowed. Here are three benefits taxpayers living abroad should know:
1. Foreign Earned Income Exclusion and Housing Exclusion
For 2017, the US government allows qualifying taxpayers to exclude up to $102,100 USD of their salary from US taxes. If your income is more than $102,100 USD, you may also be able to claim deductions for foreign housing costs paid and foreign taxes paid.
2. Automatic Filing Extension
If you are living abroad on April 15th, the US allows you an automatic two month extension to file your taxes extending the deadline to June 15th. Even with the automatic extension, you are still required to pay all your taxes (if any) before April 15th or penalties and interest will be accrued for unpaid amounts.
3. No Withholding Taken Out of Pay
If you are employed by a foreign employer, the foreign employer usually will not withhold any amounts from each payment you receive. This will allow you to have more control of the money you earn, but also require you to be more responsible with managing your cash flow…especially if you need to pay foreign taxes and US taxes.
For certain taxpayers living abroad, they may need to make quarterly estimated tax payments throughout the tax year. This process may be necessary as most foreign employers do not withhold any US taxes from employees’ paychecks.
Important reminder about FBAR (Foreign Bank Account Report)
Beginning in calendar year 2017, FBAR’s filed in 2018, the revised deadline is April 15th. Previously the deadline was June 30th.
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The information contained herein serves as a guideline and is only provided for general informational purposes. It should not be considered as offering any tax advice. Since tax laws are complex, you should consult your tax advisor on specific issues related to your tax situation.