EXPOSED: The #1 Mistake American Expats Make with Their Taxes (And How to Avoid It!)
Are you an American expat living abroad? If so, you’re likely aware of the complexities surrounding expat taxes. From Foreign Bank Account Reports (FBAR) to Foreign Account Tax Compliance Act (FATCA), the regulations can be overwhelming. However, there’s one mistake that many American expats make without even realizing it – and it could cost them thousands of dollars.
The Mistake: Not Claiming the Foreign Earned Income Exclusion (FEIE)
The FEIE is a tax deduction that allows qualified expats to exclude a certain amount of foreign-earned income from their taxable income. For the 2022 tax year, this exclusion is $105,900. However, many expats fail to claim this exclusion, resulting in a higher tax liability.
How to Avoid This Mistake
To avoid missing out on the FEIE, expats should:
- Determine if they qualify for the exclusion
- Keep accurate records of foreign-earned income
- File Form 2555 with the IRS to claim the exclusion
By claiming the FEIE, American expats can significantly reduce their tax liability and avoid costly penalties.
