How US Citizenship Based Taxation Works? What US Citizens Living Abroad NEED To Know?

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This video is inspired by one of our subscribers who asked about US Citizenship based taxation, and how it works? What American citizens living abroad need to know, even if they have dual citizenship, regarding taxes and filings?

This is a very serious and important topic. US citizens living abroad have more consequences than any other nationals. Today we are giving you a basic overview of this topic.

Americans are pretty much the only ones who have citizenship-based taxation. Meaning that if you're American you will have to pay the US taxes no matter where you live in the world, as long as you hold American citizenship.

Keep in mind that this is very different than worldwide taxation. Most countries will have worldwide taxation, meaning that you will have to pay taxes on your worldwide income, as long as you're a resident of that country. This is the case for Sweden, Canada, UK, etc. However, as soon as you leave that country, even if you hold a passport, you will not have to pay taxes anymore.

As we already said, if you're an American living abroad you will need to file American taxes. It doesn't matter if you hold another citizenship (if you're a dual citizen) as long as you hold an American passport you will need to comply with this rule.
There is NO place in the world where you can go that will get you out of this obligation.

In addition to this, there are some other obligations, such as FBAR (Foreign Bank Account Reporting). This means that you will have to report all of your foreign bank accounts and if you fail to do so consequences are brutal.
They will penalize you 50% of the account value for each year you didn't report it. This is very draconian and needs to be taken very seriously. Make sure you report your foreign bank accounts!

Because of these draconian rules, as an American, you might have issues opening bank accounts abroad, because banks might not want to deal with American reporting standards.
FATCA Rules (Foreign Account Tax Compliance Act)made all the foreign banks reporting agents for the IRS.

On the brighter side, there are tax credits available to Americans living abroad. You could also qualify for foreign earned income exclusion, which we already talked about in one of our previous videos.
This will allow you to have approximately $110 000 of foreign income tax-free. You will need to pay US taxes on everything on top of that.

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Видео How US Citizenship Based Taxation Works? What US Citizens Living Abroad NEED To Know? канала Offshore Citizen