How to Save on Tax When Living Overseas
As a United States citizen, you are required to file a tax return no matter where in the world you live. This can be a daunting task, especially if you are not familiar with the tax code of the country where you reside. Don’t worry, we have some information that should help today.
Firstly, don’t just accept high taxes because there are ways to save on tax when living outside of the United States. You should take the time to learn about the foreign earned income exclusion, for example. This allows you to exclude a certain amount of your income from being taxed. The amount you can exclude depends on several factors, including your filing status and whether you meet the physical presence test or the bona fide residence test.
You may also be able to exclude or deduct certain housing amounts. The rules for this are complex, but if you qualify, it can result in a significant reduction in your taxable income.
There are several deductions and credits that you may be eligible for as a US citizen living overseas; these can help to offset the impact of any taxes you may owe. If you are self-employed, there are also some additional deductions that you may be able to take advantage of.
If you are a US citizen living overseas, it is important to understand your rights and the steps that can limit your tax burden each year. With the right steps, you can leave more money in your pocket.
While these are all helpful tips, there’s another step that most overseas US citizens are either unaware of or don’t understand.
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Mail Forwarding Services
In truth, this should be called an Expats Tax Saving Service because this is exactly what it does for many expats. With mail forwarding service, all your snail mail is sent to an address in the US, normally belonging to the company that you choose. You can have your bills, tax documents, and other important mail sent to this US address. The company will then scan the documents and upload them into an online portal that you can access from anywhere in the world. From here, you can decide what needs to be sent to your new address and what can be shredded or thrown away.
Why is this beneficial for tax purposes? Because it means you can register with an address in a state that has more favorable tax regulations. As an example, South Dakota is a common choice for services of this type. This state has no income tax, which can save you a lot of money if you are earning a good salary or want to keep more money in your pocket.
As well as no income tax, South Dakota also has other benefits that make it attractive for those looking to reduce their tax bill. These include lower sales tax and property taxes, as well as no estate tax. This means that if you are leaving your property to your heirs, they will not have to pay any tax on it. Just in case this isn’t enough, both vehicle tax and insurance are generally lower for people registered in the state.
If you’re living abroad, it doesn’t make sense to remain registered in a state with high income tax. Instead, you can register in a state with no income tax and save yourself a lot of money. This is perfectly legal, so long as you file your federal return and pay any tax that you may owe. Why not explore your options today?
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