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U.S. expats with six-figure salaries could benefit from potential U.S. tax reform.

American lawmakers are “seriously” considering a measure that would tax U.S. expats on only income earned in the U.S., reports the Financial Times (article has paywall).

For the 2016 tax year, U.S. expats can exclude up to US$101,300 from their worldwide income for U.S. tax purposes. Foreign earnings above that are subject to U.S. tax — above and beyond the tax that U.S. expats pay to their host countries.

Read: Clients may risk steep penalties if they don’t file U.S. tax forms

Several organizations and professionals are cited by FT as supportive of the potential measure.

Read the full article (has paywall).

Also read:

U.S. post-secondary students may save by going abroad

How to bring 401(k)s and IRAs to Canada

4 tax tips for American-Canadians

Originally published on Advisor.ca
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John Richardson

Assuming the accuracy of this article, a change from the U.S. policy of defining “tax residency” in terms of citizenship is good news for the world. The USA should join the rest of the world and adopt the international standard of defining “tax residence” in terms of an actual physical connection to the USA.

Because birth on US soil is sufficient to confer US citizenship, there are tens of thousands (if not more) Canadian citizens resident in Canada who are subject to the US Internal Revenue Code. Some are aware of this and some are not.

The biggest beneficiaries of this possible change in US tax policy are the citizens and residents of other countries who just happen to have been born in the United States. At the present time, FATCA is being used to “identify” those Canadian citizen/residents who were born in the United States.

Think of it! At present the USA is imposing taxation on Canadian citizens who are resident in Canada who do not consider themselves to be American!

Friday, Oct 27, 2017 at 8:15 am Reply

Frank Norman

A blanket statement that Foreign earnings above US$101,300 are subject to U.S. tax is unnecessarily alarming – it ignores the fact that Foreign Tax Credits on the excess of earnings will generally eliminate US tax, except when the income is earned in a country such as Saudi Arabia where taxes are lower than the USA.

Thursday, Oct 26, 2017 at 2:24 am Reply

Barbara

Not only U.S. expats with six-figure salaries will benefit from the proposed changes. ALL Americans living abroad–teachers, missionaries, journalists, housewives, and, yes, bankers–will benefit, by joining the rest of the world in not having to file tax forms to the US government. Millions of us living outside the USA spend thousands of dollars annually to accountants to help prepare the obtuse, complex, penalty-driven tax forms, even if we don’t owe a penny in tax.

Please don’t paint this issue in a “fat cats” versus poor regular folks light. A switch to Residency Based Taxation for US citizens abroad is long overdue.

Wednesday, Oct 25, 2017 at 11:55 pm Reply