Working in some other country when you’re an American citizen can be a tricky situation, especially when it comes to the making tax payment in a foreign land. Well no one likes all the nuances that compromise the tax season, and staying abroad and reporting your worldwide income and paying taxes on them make it no easier. This is why it is important that you know the basic rules, regulations and laws that govern the payment of expat taxes when you are living abroad. This also includes the fact that your process of tax payment will be easier once you are aware of the nuances. While you can always use the services of a tax lawyer in order to help you out, here are 3 basic expat taxes laws that will keep you floated:

1.      Exemption For Foreign Earned Income

 If you have been living and actively working on foreign land for a period of 330 days during an overall duration of 12 months, you are eligible to have your foreign earned income exempted from your tax payment. The maximum cap for the exemption is $92,900 for you and another $92,900 for your spouse in case she has been living with you and also working.

The trick in this law lies in the fact that it necessitates you to file a tax return on the same meaning that you will need to pay the usual tax amount on this income at first. Later on, you will receive a tax return certificate and check after exempting the calculated amount from your filed income and the same will be returned to you. Yes, it is a bit confusing, but well, nothing good comes without its share of complexities.

2.      Foreign Tax Credit

 When you are earning abroad and needing to pay taxes to America, you can always resort to the services of foreign tax credit in order to take care of your momentary shortage of money problems. In order to be eligible for foreign tax credit you will need to file for taxes worth $92,900 of income. This provision is in place to facilitate the tax payment in case you are in a country that has a higher tax payment rate than the USA has.

3.      Tax Treaties

 Here is some good news if you have been cursing your luck of foreign transfer due to the fact that you will need to pay multiple instances of taxes for social security in the USA and abroad at the same time. The USA has tax treaties with more than 60 countries around the world which exempts you from paying Medicare taxes and social security taxes in the USA in case you have a qualifying taxable and filed income amount in the foreign country.


A word of caution here; tax treaties are difficult to understand for the layman and it is best to consult a tax attorney for the same.


With these 3 laws in your head when you are earning overseas, you can rest assured that the basics of your tax payment has been taken good care of and you won’t be running into problems and troubles.