U.S. citizens and resident aliens (“green card” holders) must pay taxes on worldwide income.

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This means that, even if they do not live in the US and earn income outside the U.S., they must 
(1) file an annual tax return AND (
2) pay taxes on any income they earn (regardless of where they earned it).

But there is some relief.

Congress allows U.S. citizens and resident aliens not to pay Federal income taxes on up to US$105,900 of foreign earned income per year for 2019.

But, be careful – it does not apply to all income and does not exempt them from all taxes.

They can only exclude foreign earned income (such as wages and other compensation for services performed outside the U.S.). Also, the exclusion only applies to income tax. Payroll taxes (social security and Medicare) are not reduced by this exclusion. Similarly, depending on their state of domiciliation or residency, State income taxes may not be reduced by this exclusion.

Finally, there are additional requirements they must meet to avail themselves of this exclusion.

In particular, to qualify for the exclusion, they must be out of the U.S. for 330 days during each 12 month period throughout the tax year or qualify for a bona fide foreign resident test for the full calendar year. The 330-day test is simple math… be out of the U.S. for a total of 330 days and you are qualified. It doesn’t matter where you are in the world so long as you’re not in the U.S.

The bona fide residency test is more complex and it is wise to examine your intentions.

You must move to a foreign country for the “foreseeable future.” This new country should be your home and your home base. When you travel, it’s where you return to. It’s where you lay down roots. It’s where you file taxes and where you’re a legal resident (with a residency permit).  In most cases, you will use the 330-day test in your first year abroad. That will give you time to secure residency, find your home base and do all the things necessary to break ties with the taxes of the U.S.

Beginning January 1 of year two, you will file for the Foreign Earned Income Exclusion using the bona fideresidency test. The reason you want to use the bona fide residence test when eligible is that it will allow you to spend more time in the United States. Under the 330-day test, you can only spend 36 days a year in the U.S. If you qualify for the residency test under the Foreign Earned Income Exclusion for 2019, you can spend 4 or 5 months a year in the U.S.

Just remember that it is only foreign earned income (earned income for services performed outside the U.S.) that can take advantage of the exclusion.





And taxes are so confusing to begin with.  Who needs to file?  What needs to be included?  Am I taking all the deductions available to me?


What can be expensed?
For the nearly 35% of the workforce that subsists on freelance income, taxes can be extra tricky. Tax returns can be significantly reduced due to 1099 quarterly taxes, but one way to offset self-employment taxes is to expense correctly. Most anything can be expensed — as long as you have proof that it was used for business purposes. Popular expenses include, but are not limited to, your car, apartment, computer, cell phone, equipment, postage among others.

What are qualified education expenses?
Qualified education expenses are costs associated with a college education. This includes amounts paid for tuition, fees, school supplies, and other student costs. Items that cannot be expensed include room and board, insurance, medical expenses, transportation, non-credit courses, etc.

Is childcare deductible if I work full time?
Many parents who work full time overlook the fact that, in many cases, they qualify for a sizeable tax deduction if their kids go to childcare while they work. Daycare, summer camp and other forms of childcare are eligible for deduction. Basically, if you work fulltime, and your child is under 13, you might qualify for a deduction up to $2,100.

Do I qualify for the child tax credit?
The child tax credit can reduce your tax burden by up to $1,000 — per kid — if you meet certain requirements. Qualification criteria include age, child relationship, dependent status, family income, and more.

If you are married you can file separately, but you will miss out on many tax advantages that come with being married. Jointly filing couples receive a larger standard deduction, qualify for two exemptions, and, in some cases, qualify for two tax credits. If you have a financial reason to file separately it is possible, but it’s important to recognize the benefits of joint filing.

I hope you found this helpful.  For more information on this and other topics:

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(51) 949-968-555. All consultations are free and confidential. 

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