United States Tax Treaties with Other Countries
As an American Expat you will want to know about all the benefits for expat taxes while you are overseas.
The United States has signed tax treaties with many different countries (actually over 60). Every country and treaty has different exemptions and tax savings features. Tax treaties help eliminate or lower taxes for American citizens and/or green card holders living abroad. Although each treaty has its own qualifications, most are based on residency, nationality, and reason for being abroad.
The tax treaties are not designed to help save taxes that you actually owe to the US. As a matter of fact, most of the income tax treaties have what is known as the “saving clause” which stops an American expat from using tax treaties to sidestep taxation of United States basis income.
If you are traveling abroad as a student, teacher, researcher or trainee for a brief period of time, most tax treaties offer the exemption of taxation in the host country. However, these classifications will not exempt from the US tax that you may owe on your income.
Since all countries do not have a tax treaty or the treaty may not cover your specific income, you may owe tax to the US at the same rate that you would owe if you lived onshore.
Some states require you to file even if you are living overseas. Consult with an Expat Tax Expert and see if your state requires you to file.
The United States government is continually working on expanding tax treaties to other countries. For more information on tax treaties check out the IRS Tax Treaty Section.
Still have questions? Contact us today and we can see if you are covered under a treaty and get you started on your tax return today!