Tag Archives | taxes

Expat Tax Benefits

IRS Foreign Earned Income ExclusionSeeing as how today is April 15th (the day taxes are due in the United States), I thought it would be fitting to finally finish the post I had been working on regarding some of the tax benefits to being an expat.

When I decided to move to Buenos Aires last year, I wasn’t aware that there could also be some pretty interesting tax savings involved in living out of the country.  As a U.S. citizen living out of the country you are still taxed on your worldwide income and must still file a tax return. In fact, it is against the law to give up your U.S. citizenship in order to avoid U.S. taxes.  However, you may be able to exclude the first $87,600 of your income from taxes as well as exclude or deduct certain foreign housing payments.

According to the IRS Publication 54 which covers this, to claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you must meet all three of the following requirements.

  1. Your tax home must be in a foreign country.
  2. You must have foreign earned income.
  3. You must be either:
    1. A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year,
    2. A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or
    3. A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.

Clearly, one of the biggest benefits for U.S. expats is the ability to exclude up to $87,600 in foreign earned income.  According to the IRS, foreign earned income generally is income you receive for services you perform during a period in which you meet both of the following requirements:

  • Your tax home is in a foreign country.
  • You meet either the bona fide residence test or the physical presence test.

The source of your earned income is the place where you perform the services for which you received the income. Foreign earned income is income you receive for working in a foreign country. Where or how you are paid has no effect on the source of the income. For example, income you receive for work done in Argentina is income from a foreign source even if the income is paid directly to your bank account in the United States and your employer is located in New York City.

The IRS covers this in a lot of detail in Publication 54 and, of course, you should consult with an accountant as well.

For some additional reference, Don Nelson an attorney and CPA has a good post on this titled “US Taxation Of Americans Living Abroad.”His post also covers the need for self-employed Americans to file a Schedule C and pay the self-employment tax of 15.3% which is not reduced by the foreign earned income exclusion.  The Career By Choice blog also has an excellent two-part article on this:  Expat Tax: Foreign Earned Income Exclusion Explained – Part 1 and Expat Tax: Bona Fide Residency Test for FEIE – Part 2.

Hopefully this will work out for you as well!


Buenos Aires News: Edition 6

20% Of Kids Say It’s Ok To Pay Bribes [Argentine Post]
The Argentine Post has an interesting summary of a survey by the Argentine education ministry conducted on public school students aged 11-15.  20% of the students surveyed say it’s sometimes or always ok to pay a bribe while 30% say it’s ok to avoid paying taxes. Check out the article for other interesting details.

Argentina Strikes Give Travelers Holiday Headache [Bloomberg]
Subway workers in Argentina walked off their jobs today, disrupting travel for as many as one million commuters as employee demands for increased pay and job security disrupt banks, taxi service and the holiday season. Gas station owners and about 140,000 bank workers plan to stop work next week. Cab drivers are threatening to stay off the roads Dec. 24 and 25, when many residents will try to shuttle between holiday parties.

Human remains found in Argentine detention center [Associated Press]
Inside a once-secret detention center where political dissidents were tortured and killed during Argentina’s dictatorship 25 years ago, forensic anthropologists have discovered a pit containing 10,000 bone fragments.  The first discovery of human remains inside a detention center confirms the testimonies of hundreds of survivors who have said for years that authorities tortured, killed and burned the bodies of political opponents, they said Tuesday…

Argentine lower house passes questioned tax breaks [Reuters]
Argentina’s lower house passed early on Thursday a package of tax breaks that the administration hopes will stimulate the economy but critics say could encourage money laundering instead.The law includes huge tax cuts on undeclared offshore funds that are repatriated, tax incentives for companies that put under-the-table workers on the books, and deals for tax evaders who sign up for payment plans.

Argentina’s Buenos Aires Scrooges Forced to Rescind Ban on Christmas Carolers [LAHT]
The decision by the government of Buenos Aires this year not to authorize the tradition of caroling in the street on Thursday sparked a heated controversy among defenders of the Christmas spirit which eventually was settled by the revocation of the measure.

Argentina looks to taxis to get economy moving [AP]
Argentina’s government hopes 15,000 new taxis will help get the economy moving. President Cristina Fernandez says the government will offer taxi drivers credits on half the value of a taxi at a below-market interest rate of 11 percent It’s part of a series of programs to boost production and ease credit in South America’s second largest economy.

Going pinker on the Plata – Gay Tourism in Buenos Aires [Economist]
Gay tourists have flocked to Buenos Aires since Argentina’s 2002 currency devaluation made it one of the world’s most affordable destinations. Tourism officials reckon that at least a fifth of foreign visitors to the city are gay.


Buenos Aires News: Edition 1

Welcome to the first of a weekly series highlighting some of what I consider to be the more interesting news from Buenos Aires and Argentina.  I find many new things every week and often want to blog about them, but realize that I don’t always have the time to get to them.  Hopefully, with these posts, I can just give a quick summary and you can read the ones that interest you.

Maradona rubbed from Yahoo! web by Argentinian judge [The Register]
Following a judge’s temporary restraining order, all searches for Diego Maradona, Argentina’s most (in)famous soccer player, on Yahoo! Argentina have been blocked.  Argentine judges have issued more than 100 search site restraining orders over the past two years in an attempt to expunge allegedly inappropriate references to some of the country’s most recognizable names. Most of these have been lead by one attorney who is effectively censoring the Internet.

Argentine Fans Hijack Public Buses To Go To Match [Reuters UK]
How much do Argentines love their soccer?  Let’s just say that things often get a little crazy when soccer is involved and this latest story is no exception.  On November 13, in two separate incidents, fans of an Argentine second division soccer team hijacked two public buses and ordered the drivers to take them to their team’s game.

Spare Change? There’s None in Buenos Aires [Time]
Time has a good article covering the shortage of coins in Buenos Aires and the problems it’s causing across the city.  Many stores have “No Change” signs up, large grocery stores routinely round-off the total in their favor.  So acute was the coin shortage, one day last month, that the Metrovias subway company was forced to open its turnstiles and let passengers ride for free after it ran out of change. Interesting article…

Argentina vetoes glacier law that curbed mining [Reuters]
Argentina’s president has vetoed a law that would have protected the country’s glaciers by restricting mining and oil drilling. The law, which was passed by Congress last month, was vetoed by President Cristina Fernandez. She issued a decree stating that governors in Andean provinces feared the glacier law could threaten economic development in their regions.

Al Jazeera focuses on Latin America [The Miami Herald]
The Buenos Aires office of Al Jazerra’s English service is dedicated to reporting the news from Latin America in a different way.

Brazil, Argentina Agree to Increase Import Taxes [Bloomberg]
As if imported good were not expensive enough here, Bloomberg is reporting that import taxes will be raised on various products including wine, peaches, canned foods, textiles, pasta and wooden furniture, from outside the Mercosur trading bloc.

Fiscal Crisis Gives Argentines Familiar Sinking Feeling [New York Times]
A growing number of Argentines are stockpiling dollars amid worries that their government’s economic policies have doomed them to yet another financial crisis.