As an American expatriate living abroad, you have a unique opportunity to claim a Foreign Tax Credit. By doing so, you will avoid dual taxation, which is when two different countries impose taxes on the same income. No one wants to be doubly taxed of course, but if you’re caught unaware you could be subject to this potential unfairness.
Expats should understand how important it is to complete Form 1116. This form is then attached to your U.S. expat tax return. Then you’ll be able to claim this credit and avoid paying United States taxes on income that you have already paid on in your foreign tax home.
In order to qualify for the Foreign Tax Credit expats must have earned income, have paid tax or acquired a tax liability that you will have to pay in the future and live legally in the foreign country as an American expat.
Claiming the Foreign Tax Credit directly offsets your U.S. taxes for any income earned overseas. This can only be used to offset U.S. taxes on your interest, dividends or compensation earned abroad. It cannot exceed the amount of U.S. taxes you pay on the foreign income. If it does exceed that amount, you can carry forward the balance to future tax years.
The talented team at Expatriate Tax Returns will be able to quickly determine if you are eligible for this credit and if you are, a tax expert will walk you through this process. We don’t want you to be unfairly double taxed and that is why it is critical to know about the Foreign Tax Credit before filing your expat tax returns.
Contact Expatriate Tax Returns for more information by calling 877-382-9123 toll free.