End-of-year tax planning can be crucial for U.S. expats, as they may have additional tax considerations to take into account. Here are a few steps that U.S. expats can consider as part of their end-of-year tax planning:
1. Determine your tax residency: The first step in end-of-year tax planning is to determine your tax residency status. If you are a U.S. citizen or green card holder, you are generally considered a tax resident of the U.S. and are required to report and pay taxes on your worldwide income. If you are a U.S. expat who meets the substantial presence test or the green card test, you may be considered a tax resident of the U.S. even if you are living abroad. If you are not a U.S. tax resident, you may still be required to file a U.S. tax return if you have U.S. source income.
2. Review your income and deductions: Next, review your income and deductions for the year to determine if you will owe taxes or be entitled to a refund. Remember that as a U.S. expat, you may be eligible for certain exclusions and deductions that can reduce your tax liability, such as the foreign earned income exclusion and the foreign housing exclusion.
3. Make tax payments: If you expect to owe taxes, you should make estimated tax payments or adjust your withholding to avoid underpayment penalties. Remember that as a U.S. expat, you may be required to make estimated tax payments even if you are not required to do so as a domestic taxpayer.
4. Consider contributing to a retirement account: If you are eligible, consider contributing to a retirement account such as a Traditional Individual Retirement Account (IRA). Contributions to these accounts may be tax-deductible or may grow tax-free, depending on the type of account.
5. Review your estate planning documents: Finally, review your estate planning documents to ensure that they are up to date and reflect your current wishes. This is especially important for U.S. expats, as the laws governing estate planning and inheritance can vary significantly from country to country.
It's a good idea to consult with a tax and financial professional who is familiar with the tax laws that apply to U.S. expats to ensure that you are meeting your tax obligations and taking advantage of all available exclusions and deductions.
If you have questions about end of year planning or organizing your financial life in the New Year be sure to schedule a free initial consultant.