The IRS Standard Deduction in 2022 for U.S Expats

The IRS Standard Deduction:

The Tax Preparation Services in Washington deduct a fixed amount of U.S citizen income from U.S Tax. This amount is deducted when they file their federal return.

The Standard Deduction allows Americans to avoid the hassle of itemizing their actual deductions when they file. However, this amount of the Standard Deduction was very low before the year 2017 Tax. Since this amount increased in the act though, about 90% of Americans now claim it rather than itemize their deductions.

Should Expats claim the Standard Deduction:

American Expats need to file a U.S federal tax return. This is because the U.S taxes are based on citizenship, rather than on residence the way that is used by other countries.

Before Expats file their taxes, they may reduce their U.S tax bill by claiming the FEIE (Foreign Earned Income Exclusion).

The Tax Preparation Services in Washington allows Expats to claim their U.S tax credit that is up to the value of Foreign income tax they have paid in a foreign country. In case, they are living in a country with higher foreign tax rates than the U.S. Moreover, they may claim the Foreign Tax Credit by filing IRS Form 1116. This will eliminate their U.S tax bill.

Alternatively, the U.S Expat can claim the FEIE (Foreign Earned Income Exclusion) on IRS form 2555. This means that most Expat who does not pay foreign income taxes can eliminate their U.S tax bill too. Although, it is important to note that the Foreign Earned Income Exclusion only relates to earned income and that the Expat claim has to meet Internal Revenue definitions of living abroad.

Moreover, claiming one of these two provisions is a great way. This Expat will eliminate their tax liability. However, for any reason they do owe tax, the Expats will have the right to claim the Standard Deduction in 2022. Contact us for tax preparation services in Washington.

Expat benefits from seeking Advice:

Tax filing for U.S Expats is different compared to filing taxes in the U.S. The Expats need to file additional forms to reduce their tax bill. Also, they need to deal with currency conversions if they have foreign currency income. They need to file requirements such as FBAR filing.

FBAR filing is necessary for any Americans who are over a certain amount in total at any time in the year. In their combined foreign-registered financial accounts, including bank, investment, and individual pension accounts. Those businesses’ accounts are not registered in their name.

Moreover, Expats need to report their foreign business interests, and other financial assets separately.

Additionally, it is better for the vast majority of Expats to seek advice from an Expat tax specialist. So, they can rely on a U.S based accountant or software. Moreover, neither of them can offer advice to allow Expats to file in their best interests.

Alternative Minimum Tax Exemption in 2022:

The AMT (Alternative Minimum Tax) is a tax imposed on taxpayers. This tax is on those who earn above certain thresholds, estates, and trusts.

Moreover, the AMT filers calculate their income tax twice under ordinary tax rules and under the stricter AMT rules. Additionally, this will ensure that the filer will pay tax to the Federal Government regardless of the number of deductions they claim.

Kiddie Tax Rules in 2022:

This tax rule affects investment and unearned income for children under age 18 or is full-time students. However, this rule does not apply to those under these ages or those who are married and file joint tax returns.

The unearned income that exceeds a certain threshold is taxed at the parent’s income tax rate, instead of the child’s lower rate. This rule prevents parents from avoiding taxes by transferring stock to their children.

Other than investment dividends and interest, income that is taxed under this rule includes capital gains, rent, taxable scholarships, and inherited IRA (Individual Retirement Account) distributions.

The US taxes its citizens regardless of where they live:

The United States and Eritrea are the only two countries that tax their citizens regardless of where they are in the world. So, the rules for filing income, gift tax returns, estates, and paying estimated taxes are the same whether you live abroad or in the United States.

Hence, your worldwide income will always be subject to U.S income tax, no matter where you are living. Additionally, U.S Expats do receive tax benefits and two months extension to file their tax returns without penalties.

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