Living in Hong Kong offers you a low-tax environment, since the city doesn’t impose capital gains tax, estate duty, or tax on dividends and interest. As a U.S. citizen, you still file both Hong Kong and U.S. returns, so it pays to learn which Hong Kong-specific tax deductions for expats can lower your local bill and ease your IRS filing.
By tapping into local allowances and deductible expenses, you’ll keep more of your income in your pocket.
Understand deduction basics
The Hong Kong Salaries Tax applies only to income arising in or derived from work in Hong Kong. For the Year of Assessment 2024/25, rates run from 2% on your first HKD 50,000 of taxable income up to 17% on amounts above HKD 200,000. You pay the lower of the progressive rate on net chargeable income or a 15% standard rate on net income, whichever yields less tax. Good news, you get to deduct personal allowances and certain expenses before rates apply.
As a U.S. citizen you still file a U.S. return, even if your Hong Kong–sourced income is tax-exempt under territorial rules. For details on reporting, see our guide on U.S. expat tax implications in Hong Kong. To confirm your local liabilities, check the Hong Kong tax residency rules for U.S. expats.
Claim housing expenses
Good news, if you meet either the bona fide residence test or the physical presence test, you can exclude a portion of your housing costs on your U.S. return. With a 2024 FEIE limit of US$126,500, the 30% cap means you can exclude up to US$37,950 for housing (minus a base amount equal to 16% of the FEIE). Housing expenses must exceed the base amount to qualify.
Typical qualifying expenses include:
- Rent, utilities, parking fees
- Household repairs and property insurance
- Furniture and accessory rentals
Excluded expenses include mortgage principal, domestic labor, and employer-provided lodging not included in income. Employees report the housing exclusion on Form 2555 (line 31). Self-employed individuals use the foreign housing deduction on Form 1040 (line 36). For more filing details and deadlines, see Hong Kong tax filing requirements for U.S. expats.
Maximize allowances and contributions
Hong Kong grants several personal allowances and lets you deduct retirement contributions before tax. Key items to claim on your Hong Kong return include:
Allowances
- Basic allowance: HKD 132,000 per individual
- Married person’s allowance: HKD 264,000 for joint assessment
- Dependent parent or grandparent allowance: up to HKD 100,000 per relative
- Child and disability allowances: check the IRD website for current figures
Retirement contributions
- Mandatory Provident Fund (MPF): employee and employer each contribute 5% of salary (capped at HKD 1,500 per month); up to HKD 18,000 deductible per year
- Voluntary MPF and recognized occupational retirement schemes: also count toward the HKD 18,000 annual limit
You’re in control of these deductions, and choosing the right mix can cut your salaries tax substantially.
Deduct personal expenses
Beyond allowances, Hong Kong lets you deduct a range of personal expenses. Here’s a quick overview:
| Expense type | Deduction limit |
|---|---|
| VHIS premiums | HKD 8,000 per insured person per year |
| Self-education expenses | HKD 100,000 per year for prescribed courses |
| Charitable donations | 35% of assessable income (min HKD 100 per year) |
| Elderly residential care | HKD 100,000 per parent or grandparent |
| Assisted reproductive services | HKD 100,000 per year for medical reasons |
| Home loan interest | HKD 100,000 per year (HKD 120,000 if you live with a child born on/after Oct 25, 2023) |
Keep receipts for at least six years to substantiate your claims if the Inland Revenue Department reviews them.
Recap and next steps
- Review Hong Kong salaries tax rates and choose the lower progressive or standard rate.
- Claim the foreign housing exclusion or deduction if you meet the residence or presence tests.
- Maximize personal allowances and MPF contributions on your Hong Kong return.
- Deduct eligible personal expenses such as education, care, insurance, and home loan interest.
Choose one deduction to tackle this week, gather your supporting documents, and file with confidence. If you need tailored advice, our team at American Pacific Tax is here to guide you—visit https://americanpacifictax.com for expert support. You’ve got this.
Frequently asked questions
What counts as qualifying housing expenses?
Qualifying costs include rent, utilities (electricity, water, gas), parking, household repairs, and property insurance. You must pay these amounts out of pocket and they must exceed the 16% FEIE base amount for 2024.
Which allowances should I claim on my Hong Kong return?
Start with the basic allowance (HKD 132,000) and consider married, dependent parent, and any child or disability allowances if they apply. Check the IRD website for up-to-date figures on child and disability allowances.
Can I claim VHIS premiums for dependents?
Yes, you can deduct up to HKD 8,000 per insured person per year under the Voluntary Health Insurance Scheme. There is no limit on the number of family members covered as long as each has a certified plan.
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