Tax Guide for US Citizens and Resident Aliens Abroad, Publication 54

Publication 54, also known as the Tax Guide for U.S. Citizens and Resident Aliens Abroad, is a comprehensive resource by the IRS explaining tax rules for Americans living or earning income overseas.

Who is it for?

  • U.S. Citizens living abroad: Whether working, retired, or on an extended adventure, you're subject to U.S. taxes on your worldwide income.
  • Resident Aliens Abroad: If you hold a green card or meet the substantial presence test, you're considered a resident alien for tax purposes, even when living abroad.

Key Points To Remember About Publication 54:

A. Filing requirements: You may still need to file a U.S. tax return even if you live abroad. Publication 54 details filing deadlines, forms, and electronic filing options.

B. Foreign income: All income earned abroad, including wages, pensions, investments, and rental income, is generally subject to U.S. tax.

C. Foreign earned income exclusion: This exclusion allows you to deduct a portion of your foreign earned income from U.S. taxes. For 2023, the maximum exclusion is $120,000 (adjusted annually).

D. Foreign housing exclusion: You can exclude a portion of your foreign housing expenses from U.S. taxes. Specific rules and limitations apply.

E. Foreign tax credit: This credit helps avoid double taxation by allowing you to offset foreign income taxes paid against your U.S. tax liability.

F. Other tax considerations: Publication 54 covers various other topics, such as self-employment tax, retirement contributions, and gift and estate taxes for individuals abroad.

Key Updates for 2023:

  1. Increased Foreign Earned Income Exclusion: The maximum exclusion amount rises to $112,000, offering potential tax savings.
  2. Adjusted Housing Exclusion Amounts: Limits on eligible housing expenses vary by location. Check the publication for details.
  3. IRA Contribution Limits: Contribution limits and eligibility rules for Individual Retirement Accounts remain the same as 2022.