Just before Christmas, President Donald Trump signed the 1,100-page Tax Cuts and Jobs Act, or TCJA, into law. This reform of the tax code won’t affect your 2017 expatriate filings, but it will have an effect on your 2018 tax returns. This is meant as a general guide; you should always consult with a professional at Expatriate Tax Returns before filing.
Let’s start with some acronyms:
CBT – Citizenship-Based Taxation – a country, like the United States, taxes you based on the citizenship you hold.
RBT – Residence-Based Taxation – a practice employed by many other countries, taxing you based on where you live.
FEIE – Foreign Earned Income Exclusion – This is a dollar for dollar deduction on foreign-earned money that you’ve already paid foreign taxes on, currently limited at $104,100 annually. This is calculated every year but will no longer increase as quickly. Going forward, it will no longer be calculated on the Consumer Price Index (CPI), but rather on the slower moving Chained Consumer Price Index.
FATCA – Foreign Account Tax Compliance Act – This law was enacted in 2010 and increased the US government’s authority to come after expatriate taxes.
NIIT – Net Investment Income Tax – This is a 3.8% tax that is exempt from the FEIE and often results in double taxation.
The Tax Cuts and Jobs Act won’t necessarily have a large impact on American expatriates, but you can always contact us at Expatriate Tax Returns for detailed information and consultation. In conclusion, the Tax Cuts and Jobs Act won’t have significant impacts on American expats working overseas, but expatriate owners of small businesses will definitely feel the pinch.
Tax returns are always a complicated endeavor for expats, and that will be true for this year’s returns, next year’s and beyond. Every individual situation is different, and our certified expatriate tax consultants are here for you. The 2017 tax filing deadline is June 15th – let us help you get started today!