Hong Kong tax planning for U.S. expats can unlock savings by tapping into local incentives and U.S. exclusions. If you’re an American living in Hong Kong, you benefit from a low-tax, territorial system where only Hong Kong-sourced income is taxable. You still need to report your worldwide earnings to the IRS. Good news, the Foreign Earned Income Exclusion lets you exclude up to $130,000 of foreign-earned income in tax year 2025.
With smart planning, you can cut double taxation and keep more of what you earn. Here’s how to navigate both systems step by step.
Understand U.S. filing rules
As a U.S. citizen, you must file Form 1040 every year, reporting your global income. You’ll also need to choose:
- Form 2555 to claim the Foreign Earned Income Exclusion (FEIE)
- Form 1116 to use the Foreign Tax Credit (FTC)
- FinCEN Form 114 (FBAR) if your foreign accounts exceed $10,000 at any time
- Form 8938 (FATCA) when your overseas assets pass IRS thresholds
Typically, you get until June 15 to file when living abroad, with an automatic extension (no penalty) from the usual April 15 deadline. If you use Form 4868, you can extend to October 15 but watch for interest on any tax due.
Explore Hong Kong taxation
Hong Kong taxes only income sourced within the territory. You pay:
- salaries tax (progressive rates up to 17% or standard 15%, whichever is lower)
- profits tax (8.25% on the first HK$2 million, 16.5% after)
- property tax (rate on net assessable value)
There’s no tax on capital gains, dividends, or interest. Our team at American Pacific Tax often sees clients miss Hong Kong-specific deductions such as Mandatory Provident Fund contributions. You and your employer each contribute 5% of your monthly pay (capped at HK$1,500), with annual deductions up to HK$18,000. For more on these write-offs, see our hong kong specific tax deductions for expats guide.
Use FEIE and FTC
The FEIE allows you to exclude up to $130,000 of foreign-earned income in 2025 if you meet either the bona fide residence or physical presence test. Physical presence requires 330 full days in a 12-month period abroad.
If you pay Hong Kong salaries tax, you can claim it as a credit on your U.S. return. Compare both methods:
| benefit | FEIE | FTC |
|---|---|---|
| tax reduction | up to $130,000 exclusion | dollar-for-dollar credit |
| leftover foreign tax credit | no | yes |
| self-employment tax impact | still applies | still applies |
Pick the option that yields the bigger U.S. tax cut. You can’t use FTC for income already excluded through FEIE, but you can combine both for different income streams.
For details on claiming credits, check our U.S. expat tax credits in Hong Kong article.
Comply with reporting rules
You must report certain foreign holdings or face steep penalties. Key requirements include:
- FBAR (FinCEN 114) if aggregate foreign accounts exceed $10,000
- FATCA (Form 8938) when your foreign assets exceed $200,000 on December 31 or $300,000 at any time during the year
Because Hong Kong doesn’t have a tax treaty or totalization agreement with the U.S., you may owe U.S. self-employment tax on MPF contributions if you’re self-employed. Learn more about these nuances in our Hong Kong tax treaties with the U.S. breakdown.
Meet filing deadlines
Tracking deadlines helps you avoid fines:
- U.S. forms: April 15 (auto-extended to June 15), with possible extension to October 15 via Form 4868
- Hong Kong returns: typically issued around early April, due one month later, extensions on request
Penalties in Hong Kong for late filing can reach 5% of the tax owed plus additional surcharges. Stay on top of due dates with our Hong Kong tax return deadlines for expats resource.
Recap next steps
- nail your U.S. obligations: file Form 1040, FEIE, FTC, FBAR, FATCA
- leverage Hong Kong’s territorial system and local deductions
- compare exclusions versus credits to shave your tax bill
- report all required forms and track both U.S. and Hong Kong deadlines
Once you’ve mapped these steps, American Pacific Tax can help refine your strategy. You’ve got this, and the right approach can save you thousands.
Frequently asked questions
Can I exclude all my Hong Kong earnings from U.S. tax?
You can exclude up to $130,000 of foreign-earned income in 2025 under FEIE if you meet the bona fide residence or physical presence test. Income above that limit remains taxable unless offset by FTC.
Do I need to file an FBAR for Hong Kong bank accounts?
Yes, if your aggregate foreign accounts exceed $10,000 at any point during the year, you must file FinCEN Form 114 by April 15, with an extension until October 15 if requested.
Does Hong Kong salaries tax qualify for a U.S. credit?
Absolutely. You can claim the Hong Kong tax you paid as a dollar-for-dollar Foreign Tax Credit on Form 1116, reducing your U.S. tax liability on the same income.
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