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Overseas Tax Discussed by International American Organizations
Readers of The American - and any American who lives outside the United States - will be familiar with the financial issues that make their lives different to those of virtually all other expatriates, wherever in the world they come from. Only the USA and Eritrea, of all the countries in the world, practise Citizenship Based Taxation. In other words (in layman’s terms) overseas Americans are liable to pay tax to the US Federal government on their earnings in other countries as well as in their country of residence, unless they can offset the tax burden by way of the Foreign Earned Income Exclusion arrangements (you may be able to exclude $101,700, at time of writing, plus a housing allowance, from your US taxable income), thus not paying tax on it. Depending on how much tax you pay in your country of residence you may also be able to claim Foreign Tax Credit for income you earn overseas, which can include dividends, interest, capital gains and so on.
However, all this is burdensome, expensive – most people need a potentially expensive tax expert to help them simply prove that they do not, in fact, owe any tax – and requires overseas Americans to report their financial affairs to the US government, even if they do not currently reside in the US, or do not intend to return to the States, and even in some cases have never lived in the United States (the so-called ‘accidental Americans’, who may, for instance, have had a GI parent or been born on a US-registered ship).
We spoke to Carmelan Polce, who heads the Democrats Abroad’s Taxation Task Force working on this thorny issue. You can also read the views of Michael Larsen and Jonathan Lachowitz of American Citizens Abroad, an organization working in the interests of overseas Americans. Both articles can be accessed via the below links: