US Expat Tax Filing for Dual Citizens

Americans who also hold another nationality too are known as dual citizens. Millions of Americans are dual citizens, often due to a parent or grandparent having been born abroad, and many live abroad, too.

The US tax system is based on citizenship: all US citizens are required to file US taxes on their worldwide income, wherever in the world they live. This applies regardless of whether American citizens also hold another nationality or if they qualify to file foreign taxes due to residing in another country too.

Unfortunately, the international tax treaties that the US has signed don’t prevent double taxation. Instead, American dual citizen expats who file foreign taxes can claim one or more IRS provisions for this purpose. These provisions include the Foreign Tax Credit, and the Foreign Earned Income Exclusion.

The Foreign Tax Credit allows expats to claim US tax credits to the same value as the foreign taxes that they’ve paid abroad. The Foreign Earned Income Exclusion lets expats simply exclude the first around $100,000 of their earned income. Both of these provisions have to be claimed by filing their respective forms (rather than applying automatically), and both have plenty of ‘small print’ details that affect which expats can claim them, and which is most beneficial for each particular expat.

American expat dual citizens also have other US filing obligations, such as Foreign Bank Account Report (FBAR) filing. Any American who has over $10,000 in total in non-US based bank or investment accounts atany time during a year has to report all of their financial foreign accounts by filing an FBAR to FinCEN online.

American expat dual citizens are also required to report any offshore business interests that they may have.

American dual citizens living abroad who weren’t aware that they have to file US taxes from overseas can catch up with their US tax filing without facing penalties under an IRS amnesty program called the Streamlined Procedure.

It’s always beneficial to get advice from a US expat tax sepcialist though, for dual citizens to ensure that they become and stay compliant and also so that they file in the most beneficial way possible.