We are excited to announce that our Managing Director, Christopher Chang, was a featured speaker at the American Chamber of Commerce Hong Kong event on March 19th. This event offers valuable insights as we explore what to expect from the Trump administration for US taxpayers living abroad. Here are the key takeaways from the event:

 

 

1. Do I Need to Pay 1. 1. Double Tax?

Many U.S. citizens and green card holders are concerned about the possibility of double taxation on their foreign-earned income. Fortunately, there is a Foreign Earned Income Exclusion (FEIE) available for income earned outside the U.S. For the tax year 2024, the annual FEIE is $126,500 ($130,000 for tax year 2025). Additionally, any foreign earned income not excluded from the FEIE may qualify for the foreign tax credit.

Moreover, the Foreign Housing Deduction allows eligible U.S. taxpayers living abroad to deduct certain housing expenses that exceed a base amount. For 2024, the base housing amount is calculated as 16% of the FEIE limit, which is $20,240 ($20,800 for tax year 2025). You can deduct qualified housing expenses that exceed this amount, subject to location-specific limits (up to $114,300 for Hong Kong).

2. Do I Need to File a State Tax Return if I Move Out?

Whether you need to file a state tax return depends on your residency status and state-sourced income. Some states are residency-based and will consider you a resident if you physically spend more than 183 days there. Others, like California, use a domicile-based approach, meaning that this is the place you intend to return to after any temporary absences. You could still be deemed a resident if you are domiciled there, such as by maintaining a marital abode in that state. To determine your residency status, all relevant facts and circumstances must be taken into account.

3. Key Impacts of the Expiry of Tax Cuts and Jobs Act (TCJA) Provisions at the End of 2025 (if there is no extension … we need to wait and see?)

  • Top Marginal Tax Rate: Reverts from 37% to 39.6%, with adjusted income tax thresholds.
  • Standard Deduction: Will revert to pre-TCJA levels, approximately half of current levels. The 2024 standard deduction amounts are as follows:
    • Single: $14,600
    • Married Filing Jointly (MFJ): $29,200
    • Married Filing Separately (MFS): $14,600
    • Head of Household: $21,900
  • State and Local Tax (SALT) Cap: The $10,000 cap on itemized deductions will be lifted.
  • Mortgage Interest Deduction: Increases from the first $750,000 of debt to the first $1 million for loans originating after December 16, 2017.
  • Personal Exemption: Will be restored (in 2017 it was $4,500, adjusted for inflation for 2026).
  • Charitable Deduction Limit: Reverts from 60% to 50% for cash gifts.

4. Key Proposals from President Trump and Congressional Republicans’ Tax Plan

  • Propose to remove the SALT cap at $10,000.
  • Propose to reinstate 100% bonus depreciation retroactively.
  • Propose to eliminate taxes on tips, overtime pay, and Social Security benefits.
  • Propose to eliminate purported double taxation for U.S. citizens living abroad.
  • Propose to allow a deduction for interest on auto loan payments for American-made vehicles.

As tax regulations evolve and potential reforms are discussed, we are here to assist anyone facing U.S. tax issues. If you have questions or need guidance, please find the service quotation form at https://americanpacifictax.com/service-quotation-form/. We are always here to help! And remember, Prevention is the best cure, but consult with an expert if you need the correct prescription!

Disclaimer: This information has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors or consult us regarding your own personal tax situation as this article was intended to be general in nature.