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  • Home
  • Countries

    Top Destinations:

    Whether you’re looking for fun and sun, a peaceful retirement, or the chance to earn some extra income, you’ve got a real world of opportunity open to you… In short, we’ve done our best to narrow down your best options, but only you can decide the right country for you.

    • Spain
    • Portugal
    • Panama
    • Belize
    • Colombia
    • Cyprus
    • Mexico
    • France
    • Montenegro
    • Browse All Countries

    Best For:

    • The Best Places To Retire
    • Health Care Abroad
    • Cost Of Living
    • Investing in Real Estate
    • Establishing Residency
    • Gun Laws In The World
    • English-Speaking Countries
    • Safest Places For Retirement
    • Best Places In Latin America
  • Budgets

    How Much Will It Cost You To Live Overseas?

    The only honest answer is, we have no idea. And neither does anyone else. The only one who can answer that question is you. Here’s the most important thing to understand about budgeting your new life overseas…

    Super Cheap

    • Chitré, Panama
    • Santa Marta, Colombia
    • Phuket, Thailand
    • Dumaguete, The Philippines

    Cheap

    • Medellin, Colombia
    • Boquete, Panama
    • Kyrenia, Cyprus
    • Hua Hin, Thailand
    • The Algarve, Portugal

    Affordable

    • Valencia, Spain
    • Cascais, Portugal
    • Las Terrenas, The DR
    • Pisa, Italy
    • La Rochelle, France
    • Mazatlán, Mexico

    Luxury

    • Ambergris Caye, Belize
    • Kotor, Montenegro
    • The Panama City Beaches
    • Paris, France
  • Resources

    Global Living

    • Living & Retiring Overseas
    • Raising A Family Abroad
    • Foreign Residency & Citizenship
    • Offshore & Diversification

    Making Money

    • International Real Estate
    • Banking
    • Employment
    • Investing

    Follow Us:

    • Meet Our Experts
  • Real Estate

    Buying Real Estate For Cashflow

    • Discover tips and strategies used by global property investing veterans

    Explore Our Latest Posts

    • Learn how to invest and purchase property abroad…

    Go To The Overseas Property Alert Site

    • How To Become Independently Wealthy And Fund The Lifestyle Of Your Dreams
  • Conferences

    Upcoming Events

    • Explore Our Events Site

    Live and Invest In Spain Conference

    Offshore Wealth Summit

    Greece Workshop

    VALENCIA, SPAIN

    Sep. 17-19, 2025

    PANAMA CITY, PANAMA

    Oct. 15-17, 2025

    VIRTUAL

    Nov. 13, 2025

    LEARN MORE
    DISCOUNT
    LEARN MORE
    PRE-REGISTER
    LEARN MORE
    PRE-REGISTER
    • MORE EVENTS

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    Toll-Free U.S. and Canada:
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    From Outside North America:
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    Working Hours
    Monday – Friday 08:00 am – 17:00 pm EST.

    Reach us with your questions by email at: events@liveandinvestoverseas.com

  • Store

    Unlock The World

    • Access Your Library

    Overseas Havens Reports

    • Expats' comprehensive destination guides

    Conference Kits

    • Hours of coverage  from our latests conferences

    Lahardan Books

    • Titles on living and investing around the world
    • Explore Our Store
    Your passport to a life well-lived abroad

    Services

    overseas living letter offers affordable retirement guidance
    The Simon Letter Wealth Protection Insights
    Global Property Advisor Global Investment Opportunities

    Our Customer Service team is here to assist with any questions or concerns CustomerService@LiveandInvestOverseas.com

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Home Taxes

Good News This Tax Day

by Kathleen Peddicord
Apr 14, 2024
in Taxes
0 0

Americans Stateside have been counting down to tomorrow with dread for weeks.

Tax Day.

Americans overseas get a reprieve.

Not from filing an annual return. We carry that obligation with us no matter in which country we choose to live or how long we remain in residence there. More on this in a moment. However, if you’re not physically present in the United States on April 15, you can avail of an automatic filing extension.

We Americans abroad can send in our tax returns tomorrow… or we can wait until June 15. That two-month extension is automatic.

If you’d like more time to pull your return together, you can file Form 4868. You’ll need to do that by tomorrow. That’ll give you until Oct. 15 to send Uncle Sam your paperwork.

Remember, that paperwork must include your Foreign Bank Account Report (FBAR) if you meet the reporting requirements. It’s subject to the same filing deadlines as your return.

Lief and I kick this can down the road every year. Lief just submitted our extension request online, for both our annual return and our FBAR. This time of year we hear daily from readers struggling to understand how to stay IRS compliant as Americans living or investing overseas. Some contact us in a panic, desperate for help with their reporting questions. Most U.S. tax preparers have no idea how to help an American abroad remain compliant.

Here’s what else Americans living abroad or holding investments outside the United States need to understand regarding their obligations to Uncle Sam each year.

You Must File

As I’ve mentioned, the first thing to know is that you must file a return every year no matter where in the world you’re living and no matter how long you’ve lived outside the United States.

You may or may not owe tax, but, as long as you carry your blue passport with the gold eagle on the cover, you do owe Uncle Sam paperwork annually.

The Foreign Earned Income Exclusion

Part of the answer to whether or not you owe tax to the IRS each year has to do with the Foreign Earned Income Exclusion (FEIE). The United States insists on tracking your income and assets no matter where in the world you live, but it does offer the FEIE to help mitigate how much tax you owe on your worldwide income. It’s the biggest tax benefit you have as an American working and earning income overseas… if you qualify.

You qualify in one of two ways—through the physical presence test or the bona fide resident test.

The physical presence test is fairly black and white. To qualify for the FEIE this way, you have to be physically present in a foreign country for 330 days in a 12-month period. The wording of the rule is such that it’s not days outside the United States but days in a foreign country. This seemingly small twist can create a problem for people working in maritime industries (days in international waters aren’t days in a foreign country), for example.

Ordinarily, though, it’s fairly straightforward to determine whether you pass this test or not.

The bona fide residency test isn’t as black and white. Holding a residency permit for another country is only the starting point to qualify for the FEIE this way. Every case is different, but, bottom line, you also must meet other criteria.

One factor that helps your case with the IRS is being able to show that you are liable for taxes in your country of residency. Most everyone living full-time in another country should fall into that category, but it is possible to be a resident of a country without necessarily being a tax resident of that country.

Your housing situation can also help solidify your bona fide residency status. It helps if you do not maintain a residence in the United States and if you have invested in a home in the foreign country where you’re living. It’s not that keeping a house in the United States will disqualify you from the FEIE, but, if other factors don’t clearly show where you are resident, you might be disqualified.

Having kids who go to school in the foreign country, owning a car there, having a local driver’s license, being a member of local organizations—these kinds of things provide further evidence of your status as not resident in the United States.

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If you qualify for the FEIE using the bona fide residency test, then you don’t have to worry about how many days you’re in a foreign country (or how many days you’re in the United States).

The FEIE is calculated on Form 2555. You’ll be asked to detail information about your earnings, which test you want (or need) to qualify under, and your employer’s information.

Only earned income is eligible. You cannot use the FEIE to mitigate any tax you owe on passive income.

The Foreign Housing Exclusion

In addition to the Foreign Earned Income Exclusion, if you’re working and receiving earned income in another country, you may also qualify for the Foreign Housing Exclusion (FHE). It applies if you are renting your residence while earning income in a foreign country.

Like the FEIE, you calculate this on Form 2555.

If You’re Self-Employed

If you’re self-employed as the sole proprietor of a business while working and living overseas, you’ll not only pay Social Security and Medicare taxes as you would if you were in the United States (both the employer and employee parts), but you’ll also have your FEIE reduced by your business expenses. From a tax point of view, you can be better off setting up a foreign corporation for your non-U.S. business.

Foreign Bank Accounts

I mentioned the Foreign Bank Account Report above. It’s the filing requirement you must meet if you have one or more bank accounts outside the United States. The threshold for filing the FBAR hasn’t changed since the form was introduced decades ago, though the form name and how and when you file it have.

Today officially known as the FinCEN Form 114, this is where you list all your offshore financial accounts and how much money each one holds. The form must be filed electronically online.

If you have US$10,000 or more (or the foreign currency equivalents) in one or more financial account(s) at any time during the calendar year, you have to file the form. The “at any time” part can catch you up. For example, if you open a bank account in Colombia to buy a piece of property and send US$100,000 to the account for the purchase, you meet the requirements for filing the FBAR even if that money is in the account for a single day.

The threshold is an annual test. Returning to the Colombia example, if you open an account in Colombia to buy a piece of property and transfer US$100,000 for the purchase, you must file the FBAR. However, if then, the following year, you use the account only for paying local bills and the account never contains US$10,000, you don’t have to file for that year.

The US$10,000 threshold is for aggregate balances at any time during the year. One account holding US$10,000 or more meets the requirement, as do 10 accounts containing US$1,000 apiece or more on a single day. The number of accounts isn’t the trigger, and neither is the amount in any one account. It’s the highest aggregate value on any given day.

Note that the FBAR isn’t an IRS form; it’s a Treasury Department form (the IRS’ boss).

More important to note is that the penalties for not filing an FBAR if you meet the filing requirements are draconian. Don’t not file figuring the IRS will never find out about your offshore account. In today’s world, chances are they will find out… and you’ll be made to regret your attempt to hide it.

Foreign Financial Assets

The foreign financial accounts reported on the FBAR can be a subset of total foreign financial assets you might hold.The U.S. government defines foreign financial assets as “any financial account maintained by a foreign financial institution” and “to the extent held for investment and not held in a financial account, any stock or securities issued by someone that is not a U.S. person, any interest in a foreign entity, and any financial instrument or contract with an issuer or counterparty that is not a U.S. person.”

You use Form 8938 to report any foreign financial assets that meet the threshold. It’s possible to meet the requirements for Form 8938 without meeting the requirements for the FBAR and vice versa. You have to look at each reporting threshold individually.

If you’re living in the United States, you are required to complete Form 8938 if you have foreign financial assets of more than US$50,000 on the last day of the year or of more than US$75,000 at any point during the year. Those are the amounts for single filers. The amounts double for married couples filing joint returns.

If you live outside the United States, the threshold amounts move to US$200,000 on the last day and to US$300,000 during the year for singles and double that for married filing jointly. While foreign financial accounts get reported on Form 8938 even if they are reported on the FBAR, certain other assets don’t have to be reported on this form if they are reported elsewhere, including foreign trusts and foreign corporations.

Double Taxation

If you’re earning money in a foreign country where you’re investing or doing business, taxes paid in that country on income that is also taxable in the United States is generally recoverable as a foreign tax credit or a tax deduction. Taking the tax credit is almost always the better option.

Until next time

Kathleen Peddicord signature

Kathleen Peddicord

Founding Publisher, Overseas Opportunity Letter

Tags: 'Taxes For The American Abroad'IRS Tax Filing Requirements
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Kathleen Peddicord

Kathleen Peddicord

Kathleen Peddicord has reported on opportunities for Americans to live, retire, and do business overseas for 40 years. She has traveled to more than 75 countries, invested in real estate in 24, established businesses in 7, renovated and built properties in 6, and educated her children in 5.

Kathleen has moved children, staff, enterprises, household goods, and pets from the east coast of the United States to Waterford, Ireland, then to Paris, France, and finally to Panama City, Panama, where she has based her Live And Invest Overseas business. Peddicord and her husband, Lief Simon, now divide their time between Panama and Paris.

Peddicord was a partner with Agora Publishing’s International Living group for 23 years. She opened, staffed, and operated International Living publishing and real estate marketing offices in Waterford, Ireland; Panama City, Panama; Granada, Nicaragua; Roatan, Honduras; San Miguel de Allende, Mexico; Quito, Ecuador; and Paris, France. Peddicord launched Live And Invest Overseas group in 2008 and has built it into a successful multimillion-dollar business. Today, she shares her firsthand experience of expat life with more than 500,000 readers of her publications, including Overseas Opportunity Letter and Overseas Living Letter.

Kathleen has been featured often in The New York Times, MSNBC, AARP, CNN, Bloomberg, CNBC, and more and writes monthly about expat matters, international real estate, and offshore diversification for Forbes and U.S. News.

Kathleen has written several books including the memoirs “At Home In Ireland” and “At Home At Los Islotes” and her latest title “At Home Abroad,” all published by Lahardan Books. Her best-selling "How To Retire Overseas: Everything You Need To Know To Live Well (For Less) Abroad” was published by Penguin Random House in 2018 and her “Buying Real Estate Overseas For Cash Flow (And A Better Life)” was published by Wiley in August 2020.

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To Live Overseas?

Super Cheap

  • Chitré, Panama
  • Santa Marta, Colombia
  • Phuket, Thailand
  • Dumaguete, The Philippines

Cheap

  • Medellin, Colombia
  • Boquete, Panama
  • Kyrenia, Cyprus
  • Hua Hin, Thailand
  • The Algarve, Portugal

Affordable

  • Valencia, Spain
  • Cascais, Portugal
  • Las Terrenas, The DR
  • Pisa, Italy
  • La Rochelle, France
  • Mazatlán, Mexico

Luxury

  • Ambergris Caye, Belize
  • Kotor, Montenegro
  • The Panama City Beaches
  • Paris, France

Resources

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