2018 Expat Foreign Earned Income Exclusion and Housing Exclusion

 For 2018 the foreign earned income exclusion is $104,100. This applies to earned income from your work abroad and increases each year. Many IT, Tech, and Coding employees and self employed indivduals chose to live and work abroad to take advantage of his amazing tax break.

  If you live in a no tax or low tax country, you may not have to pay any tax on this much of your earned income if you are a bonafide resident of your home country or meet the physical presence test of  not going back to the US more than 35 days during any 12 month calendar or fiscal year period.  Read more about this exclusion and how to qualify and the additional deduction you can receive for your rental expenses and living expenses abroad (housing exclusion) in publication 54 READ IT HERE

Kauffman Nelson LLP CPAs have done tax return exclusively for US Expatriates and US Nonresidents for over 20 years.  We know the laws, and the recent changes implemented by the new tax laws enacted at the end of 2017.  Email us at taxmeless@gmail.com and visit our website at www.taxmeless.com for lots of useful tax information and tax savings.

Estate and Gift Tax Planning for US Nonresidents with US Real Estate and Other US assets

Nonresidents are taxed differently on their property located in the USA than those who are citizens or permanent residents.  They do not get the same exemptions and credits and can without proper planning end up paying a lot of estate or gift taxes.

The table below shows when the IRS considers US property owned by nonresidents to be subject to estate taxes (paid upon death of the nonresident) and gift taxes (when US property and assets are transferred without consideration) during the nonresidents life.
                                                                                   ESTATE TAX                     GIFT TAX

		Estate Tax		Gift Tax
Property Type		Yes	No	Yes		No
Tangible Personal Property in U.S. (e.g., artwork, jewelry)		X		X
Currency in U.S. Safe Deposit Box		X		X
Cash Deposits in a U.S. Bank			X	X
U.S. Real Estate		X		X
Non-U.S. Real Estate			X			X
U.S. Stocks		X				X
Non-U.S. Stocks			X			X
U.S. Government and Corporate Bonds			X			X
U.S. States/Muni Bonds		X				X
U.S. Partnership/LLC Interest		Depends (a)				X
Retirement Plans			X	N/A
Life Insurance Cash Value		X				X
Life Insurance Death Benefits			X			X

(a) The law is not clear and interpretations go both ways with respect to US situs of assets and situs of acutal partnership or LLC interest.

The table below shows the differences between estate and gift taxes paid by a citizen or permanent resident from that which is paid by a nonresident (NRA) including tbe differences in exemptions, and other rules.

	U.S. Person				NRA
Estate Tax Exemption Amount	$5,430,000 per person				$60,000 per person
Top Estate and Gift Tax Rate	40%				40%
Lifetime Gift Tax Exemption Amount	$5,430,000 per person				$0
Annual Gift Tax Exclusion Amount	$14,000 per donee				$14,000 per donee
Gift Splitting Between Spouses	Yes, if both spouses are U.S. people				No
Marital Deduction for Lifetime Gifts	Unlimited if recipient spouse is a U.S. citizen				$147,000 per year if recipient spouse is a non-U.S. citizen4
Marital Deduction for Testamentary Bequests	Unlimited if recipient spouse is a U.S. citizen				$0, if recipient spouse is a non-U.S. citizen, unless assets are held in a Qualified Domestic Trust
Gift Tax Exclusion for Direct Payment of Medical and Education Expenses	Yes				Yes
Portability of Decedents Exemption	Yes				No

If you are a nonresident and need estate tax or gift tax planning for your US assets contact us at ddnelson@gmail.com. 

US Nonresidents Must Pay Tax on Their US Income

If you are a US nonresident (this is someone who does not have a green card or is not a US Citizen) and come to the US to work for a few months, you are obligated file a US tax return on your US source earnings (whether paid by a US company or a foreign company).  Your earnings might be exempt from tax under US tax treaty with your home country, but you still need to file the return to claim that  treaty exemption. Depending on the social security agreements in effect, it might even be subject to US self employment tax (social security) if you are an independent contract.

If you as a nonresident are going to file a US tax return, you need to secure a taxpayer identification number also. That process has recently become somewhat cumbersome and difficult.


A nonresident working in the US may under the laws of the state in which he or she works also be required to file a state tax return.

Failure to file a tax return will result in the statute of limitations for later requiring a return or tax to never run out.  Therefore, when in doubt you should as a nonresident always file a return.

The good news is that US nonresidents are not subject to tax on their interest income from banks, savings and loans and US treasury bills or on their capital gains from the sale of US stocks (so long as theses are investments and not connected with their US business).

Learn more about the US taxation of nonresidents at www.TaxMeLess.com 

US Nonresidents with Assets in the US will have their US Estates Subject to US up to 34% estate taxes

US nonresidents with certain assets located in the United States will cause their estates to have to file US Estate Tax returns on the value of their assets (with some exceptions) located in the USA. The tax is based on the Fair Market Value of their Assets and can be up to 35%. Nonresidents only get an exemption from this tax equal to the first $60,000 value of the fair market value of their assets in the US. The balance  of the estate's assets are subject to the estate tax.  Real estate which was owned by a deceased nonresident is subject to this tax.  The estate can only deduct the mortgage balance due from the fair market value if the estate agrees to report to the IRS the value an details of the decedents worldwide assets including those in Mexico.

Due to the large chunk this estate tax can take out of a nonresident's estate, it is best to do some advance planning to attempt to reduce it.  Email us if you want help. Read more about the nonresident  estate tax here

Taxpayers outside the U.S. face a June 15 deadline

  Taxpayers outside the U.S. who qualify for an automatic two-month extension must file their 2010 federal income tax returns by June 15, IRS said in a reminder. This deadline applies to U.S. citizens and resident aliens who both live and work outside the country, and to members of the military serving outside the U.S. Taxpayers utilizing this extension must attach a statement to their return specifying which of these conditions applies, IRS stressed. Most taxpayers abroad now qualify to use IRS Free File to prepare and electronically file their returns, IRS said. According to the agency, higher-income taxpayers should explore this option due to the foreign earned income exclusion. The $58,000 income limit applies after the exclusion of up to $91,500 is subtracted. Consequently, this makes Free File available to many higher-income taxpayers. Taxpayers who cannot meet the June 15 deadline can receive an automatic extension until Oct. 17. This is an extension of time to file, not an extension of time to pay,