Pitfalls & Traps


U.S. Taxes for Expatriates - Pitfalls and Traps

To ensure a smooth tax-filing process, you must be well informed. If you take up residence in a foreign country without exploring the tax ramifications, you may find yourself paying more than you expect to the U.S. government or your home state - as well as penalties and interest.

Some of the important considerations include…

  • Amount of foreign earned income. You may be able to deduct or exclude a substantial amount in earned foreign income from your U.S. taxes.
  • Your host country. Many countries have tax treaties or conventions with the United States, which will dictate how you file your U.S. taxes.
  • Which state you most recently lived in. Some states do not have income taxes; others make it difficult to sever your ties with that state.
  • Rental income and dividends/interest from assets in the U.S. You must pay taxes on these exactly as if you were living in the U.S.
  • Whether you are self-employed. You must pay self-employment tax on your income, even if you can exclude it as foreign earned income on your income taxes.
  • Your holdings in a foreign bank account. Any interest in or authority over a foreign financial account over a certain amount must be reported to the U.S. Treasury Department.